Industrial Development Corporation

2

• IDC in the South African Development Finance Institution landscape

• Introducing IDC

• IDC Strategy and Alignment with Government Priorities

• IDC Funding: Financing Process and Options

• Corporate Social Development

• Regional Integration

• Climate Change Response

Contents

3

Economicmerit ofdeals

Due­diligenceprocesses (risk manag.)

Portfolio diversification

Corporategovernance

Skillsbase

IDC’s successes are built on strong pillars …

4

INTRODUCTION

o Established: 1940

o Type of organisation: Development Finance Institution (DFI)

o Ownership: State owned company, 100% owned by the SA government

o Total assets: R121.3 billion (31 March 2016 - group)

o Total liabilities: R36.5 billion (31 March 2016 - group)

o Funding status: Fund operations and growth from investments, pay dividends and income tax

o Credit rating: Baa2 (Moody’s)

o Main business area: Providing funding for entrepreneurs and projects contributing to industrialisation

o Geographic activities: South Africa and the rest of Africa

o Products: Custom financial products above R1m to suit project’s needs including debt, equity, guarantees or a combination of these

o Small and Micro enterprise coverage: sefa (fully owned subsidiary)

o Stage of investment: Project identification and development, feasibility, commercialisation, expansion, modernisation

o Number of employees: 848 (March 2016)

Operational Footprint:

o Head Office -Johannesburg

o 20 Regional and Satellite offices

5

The South African DFI LandscapeCore Mandates of South Africa’s National DFIs

Core Mandate DFI

• Industrial Development Corporation (IDC), est. 1940Industrial development

• Development Bank of Southern Africa (DBSA), est. 1983Infrastructure development

• Land and Agricultural Development Bank (Land Bank), est. 1912• Independent Development Trust (IDT), est. 1990

Agriculture, land reform and rural development

• National Empowerment Fund (NEF), est. 1998Black economic empowerment

• Small Enterprise Finance Agency (sefa), est. 2012• Small Enterprise Development Agency (seda), est. 2004

SMME development

• Rural Housing Loan Fund (RHLF), est. 1996• National Housing Finance Corporation (NHFC), est. 1996• National Urban Reconstruction and Housing Agency (NURCHA), est. 1995

Housing development

• National Youth Development Agency (NYDA), est. 2009Youth development

In addition to national DFIs, there are also a number of provincial DFIs/investment promotion agencies including Ithala Development Finance Corporation (KwaZulu-Natal), Eastern Cape Development Corporation, North West Development Corporation, Free State Development Corporation, Limpopo Economic Development Agency.

6

IDC

DBSA

Land Bank

IDT

sefa

NEF

NHFC

RHLF

-

20

40

60

80

100

120

140

160

180

200

0 200 400 600 800 1000

Ass

ets

per

em

plo

yee

(R

'm)

Number of employees

Relative Sizes of South African National DFIs

Size of the bubble indicative of total asset

size

Comparison of National DFIs by Assets and Number of Employees (March 2014)

• The IDC, DBSA and Land Bank control 95% of the total assets of the national DFIs depicted in the graph, indicative of these DFIs’ dominant position in the DFI space.

Source: IDC, data obtained from company annual reports

Number of Employees and Total Assets per DFI

(March 2014)

Number of employees

Total Assets (R’m)

IDC 828 128 681DBSA 425 63 826Land Bank 568 36 819NEF 146 6 032NHFC 84 3 134sefa 194 2 227

7

Summary of IDC’s Main Activities

Activities CustomersBusiness lifecycle

Sectoral involvement

Funding products

Regional involvement

�Provision of development finance

�Project development

�Research and policy inputs

�Fund management

�Non-financial forms of business support

�Capacity building

�Business

�Government

�Other DFIs

�Conceptual

�Pre-feasibility

�Feasibility

�Product commercialisation

�Establishment

�Expansion

�Mature

�Manufacturing

�Agricultural value-add

�Mining and mineral beneficiation

�Green industries

�Industrial infrastructure

�Tourism, ICT, cultural industries and other productive services

�General debt

�Quasi-equity

�Equity

�Export/import finance

�Short-term trade finance

�Bridging finance

�Guarantees

�Venture capital

�Wholesale funding through intermediaries

�South Africa

�Rest of Africa

�Global imports of South African capital equipment

• IDC’s main activity is the provision of industrial finance to businesses throughout the business lifecycle in various sectors aligned with industrial policy priorities as well as developing projects in these industries.

• In addition, it is involved in other activities such as research, policy inputs and fund management for government departments; non-financial support for business; and capacity building for other DFIs.

8

PILLARS

Increasing Industrial

Development Impact

Ensuring Long­Term Sustainability

Financial CapitalHuman, Social, Natural and

Manufactured Capital

• Strengthen sector development objectives and strategies

• Align IDC with the sector objectives of Govpolicies

• Increased project development and implementation

• Provide industrial finance to further achievement of sector

� Plan investment return and risk

profile to ensure sufficient

growth to replace existing cash

generators

� Structure investments to

increase direct equity returns

� Human resources

o Ensure appropriately skilled and

capacitated human resources

� Stakeholders

o Improve customer service

o Build partnerships with other

financiers to leverage off different

strengths and mandates

o Increase engagement with sector

players to identify opportunities

o Develop black industrialists

o Strengthen IDC expertise to shape

and influence policy

o Build strong communities around

projects that IDC fund

9

PILLARS CONT…Increasing

Industrial

Development

Impact

Ensuring Long­Term Sustainability

Financial CapitalHuman, Social, Natural and

Manufactured Capital

• Increase regional industrial integration through the development of value chains

• Ensure effective and efficiently operating sefa

� Manage risk through

appropriate investments,

pricing and management of

the portfolio

� Natural environment

o Reduce IDC’s negative

environmental impact

o Reduce industry’s negative

environmental impact

� Utilisation of resources

o Improve efficiencies through

improved systems and

processes

10

• IDC in the South African Development Finance Institution landscape

• Introducing IDC

• IDC Strategy and Alignment with Government Priorities

• IDC Funding: Financing Process and Options

• Corporate Social Development

• Regional Integration in Africa

• Climate Change Response

Contents

IndustrialDevelopmentSectorFocus:alignedtogov programs­NDP,IPAP,NGP(economicgrowth,jobs,regionaldevelopment)

Cultural industries: Craft and film

Green and energy saving industries

Bio fuels

Metals fabrication, capital and transport

equipment

Automotives, components, medium and heavy commercial

vehicles

Plastics and chemicalsClothing, textiles,

footwear, leatherForestry, paper &

pulp, furniture

Advanced manufacturing

Agro-processing

Downstream mineral beneficiation

Tourism

Business process services

Logistics

New Growth Path

IPAP

Legend: Gov Program alignment

Pharmaceuti-cals

ICT

Healthcare

Mining related technologies

Biotechnology

Mining Areas not specifically part of

NGP or IPAP2

Industrial infrastructure

12

IDC seeks to be at the centre of industrial capacity development

Proactive industry developer

• To take greater leadership, forging strategic partnerships for developing the most important parts of the productive economy

• To decide how to actively engage with other sectors of the economy to drive outcomes

Relevant industry

body

Industry partners

Value Chains

Producers

Govt.

RoA

Enablingactivity

Commercial banks and other financial

institutions

13

INDUSTRIAL INFRASTRUCTURE -IDC’s contribution to SDGs

SDGs IDCs contribution

1: No Poverty

2: Zero Hunger

3: Good Health and Wellbeing

5: Gender Equality

6: Water & Sanitation

7: Affordable & Clean Energy

8: Decent Work

9: Industry, Innovation & Infrastructure

10: Reduce Inequalities

13: Climate friendly action

15: Partnerships for the Goals

IDCs funding and involvement in key critical

sectors of the economy directly and indirectly

impacts on almost all SDGs:

• Facilitate (direct and indirect) job creation

impacting on poverty, hunger an decent

work

• Targeted funding and support for black

industrialists, women and youth businesses,

priority regions towards reducing

inequalities

• Support for industries in agro­processing

and agriculture, chemicals &

pharmaceutical sectors also contributing on

reducing hunger, good health and wellbeing

• IDC also provides funding , coordinates and

collaborate with a number of role­players

on critical infrastructure enablers to

industrialisation such as affordable and

14

Key Trends

Funding activity

13,513,1

13,8

11,5

14,5

8,4

16

11,2 10,911,4

0

2

4

6

8

10

12

14

16

18

2012 2013 2014 2015 2016

R’b

n

Approvals Disbursements

15

Key Trends (continued)

Number of direct jobs facilitated Funding to black-empowered companies

34.7

88

18.9

22

18.2

24

14.5

37

1183

3

11.1

68

3.95

0

1.36

9

5.85

1

3439

3.36

9

0

5.000

10.000

15.000

20.000

25.000

30.000

35.000

40.000

45.000

50.000

2012 2013 2014 2015 2016

Nu

mb

er

New jobs through linkages toinformal economySaved jobs

New jobs

2,9 3,3 3,2 3,2

1,1

2,7 2,3

1,9 2,7

3,9

0,0

1,0

2,0

3,0

4,0

5,0

6,0

7,0

2012 2013 2014 2015 2016R

’bn

Black-empowered Black-owned

16

• IDC in the South African Development Finance Institution landscape

• Introducing IDC

• IDC Strategy and Alignment with Government Priorities

• IDC Funding: Financing Process and Options

• Corporate Social Development

• Regional Integration in Africa

Contents

17

Financial model

Equity funding

Loan funding

Capital growth

Interest repayments

IDC relies on borrowings, internal profitability, capital growth and exits from mature investments to maintain and expand its funding ability

Capital repayments

Dividend paymentsExits of mature

investments

IDC Funds• Borrowings• Balance sheet• Mature investments• Retained earnings

The balance between the corporation’s developmental role and financial performance is maintained by relying on proceeds from mature equity investments (both dividends and capital growth) to cross-subsidise

higher risk activities and the loan portfolio.

Subsidy

18

R4.9bnApproved for black-empowered companies (excluding subsidiaries)

15 272Jobs expected to be created and saved

IDC Results Announcement for the year ended 31 March 2016

FINANCIAL PERFORMANCE – FY 2015/16 .

R14.5bnApproved in 180 transactions

R2.9bnApproved for black-industrialists

R11.4bnTotal funding disbursed

R8.9bnApproved for manufacturing

R970mApproved for businesses with youth ownership of more than 25%

R1.2bnApproved for businesses with women ownership of more than 25%

R14.8bn breakdown - Funding Instruments

Senior

Debt…

Sub­Debt

3%

Equity

18%

BEE

10%

BBBEE

18%

R7.5bn

R2.7bn

R1.6bn

R2.6bn

R0.4bn

R14.8bn breakdown - Funding Instruments

IDC Diversification – Renewable Energy Technologies

Wind

30%

Hydro

1%CSP

55%

PV

14%

IDC Total Investment

R14.8bn

• 11 Projects, 213MW, R2.0bn

• 8 Projects, 975MW, R4.4bn

• 5 Projects, 450MW, R8.1bn

• 1 Projects, 10MW, R204M

JOBS JOBS AND LOCAL CONTENTLOCAL content

148 139

706

88

38%

78%

41%39%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

0

100

200

300

400

500

600

700

800

Wind Hydro CSP PV

Avg Jobs Avg Local Content

• CSP has the highest potential for job creation

• CSP also offers opportunity for localisation

Av

g J

ob

s

Loca

l co

nte

nt

%

22

Corporate Social Development

23

EDUCATION AND SKILLS DEVELOPMENT

Support scarce skills development

24

ECONOMIC DEVELOPMENT

We see economic development as the support of income-generating projects aimed

at poverty alleviation through job creation. Although we have funded various projects

benefiting more than 2 000 individuals since 2007, we continue to channel our efforts

towards food security, business skills development and craft development

Trade Test Instrument Board

TVET COLLEGES SUPPORT

WOMEN’S LEGACY

DO CARE

I Do Care is an employee giving fund that allows its members to contribute a portion of their

salaries to the fund on a monthly basis. The corporation matches each contribution 3:1 and

allows its members to nominate a charitable organisation of their choice to benefit from the

fund.

Regional integration in Africa

29

MOZAMBIQUE

• Mining & Beneficiation

• Agro­processing

• Energy

• Forestry

• Transport equipment

• Tourism

• Cement

NIGERIA

• ICT

• Cement

•Media

•Hotel

GHANA

• Energy

•Hotels &

Accommodation

• ICT

TOGO

• Financial services

•Transport

NAMIBIA

• Agric. / agro­processing

• Mining

•Metal products

•Financial services

• Cement

•Energy

BOTSWANA

•Hotel &

Accommodation

MALAWI

• Food and

Agriculture

• Franchising

(Tool Hire)

SUDAN

• Infrastructure

(Water)

KENYA

• Energy (Wind)

• Sugar

• Financial

services

UGANDA

•Hotels &

Accommodatio

n

• Infrastructure

TANZANIA

• Sugar

MAURITIUS

•Communications

ZAMBIA

• Storage

and

warehousi

ng

• Healthcare

• Energy

• Mining

• Metal

products

• Chemicals

SWAZILAND

• Basic chemicals

• Wood products

• Agro­processing

• Financial services

D.R. CONGO

• Mining

•Franchise

(Fast Foods)

LESOTHO

• Energy

ANGOLA

• Energy

ETHIOPIA

•Agro­

processing

• Cement

ZIMBABWE

•Mining

•Telecommunication

s

•Energy

•Financial services

•Healthcare

•Metal products

•Plastic products

Sierra Leone

• Bio­Energy

Commitment: ca R14.9 billion; in 67 projects in 21 countries. Exposure: ca R10.5 billion

SENEGAL

•Airport

• Port

development

Côte d’Ivoire

• Financial

services

MALI

•Wood

products

RWANDA

•Wood and

wood

products

The IDC’s rest of Africa portfolio (as at July 2016)

Climate Change Response

31

32

CARBON FOOTPRINT

Prospects

Thank you

Industrial Development Corporation19 Fredman Drive, SandownPO Box 784055, Sandton, 2146South AfricaTelephone 011 269 3000Facsimile 011 269 2116E-mail callcentre@idc.co.za