The IDC:Financing For DevelopmentUNIDO Rhythm/Working Group Meeting PresentationMoroasereme NtsoaneSBU Head011 269 3174 (t...
Contents• IDC Corporate Profile• Development Finance Approach• Performance of automotive industries• IDC Assistance
Introducing the IDC• Established in 1940, the IDC is a self -financing,  State-owned development finance institution• The ...
Introducing the IDC (cont.)Vision             To be “the primary driving force of commercially sustainable industrial deve...
Introducing the IDC: industry development        Food,           Mining and       Forestry, Wood,      Clothing,          ...
Introducing the IDC: industry development (cont.)Public, Private     Transport,                                 Media and ...
Actively supporting business/industries in AfricaThe South African Government is committed to support economicdevelopment ...
Financial instruments• IDC offers a wide array of financial  instruments, including :   –   Equity   –   Quasi-equity   – ...
Financing criteria• Greenfield projects, expansions & rehabilitations• Minimum financing in South Africa  R1 million  (US...
Role in project development• Co-sponsor feasibility studies• Identify project opportunities• Provide and arrange funding (...
Role in project development (cont.)• Assist with the early negotiations of project   agreements to improve and ensure thei...
Examples of early-stage project developmentSome of the projects under investigation include:– Solar power generation: A re...
Assisting our business partners during theeconomic crisisThe economic crisis is impacting businesses on various levels    ...
Financing of infrastructure projects• The IDC‟s Public-Private Partnerships Strategic Business Unit (PPP  SBU) provides de...
IDC‟s pipeline of infrastructure projectsSome of the major projects in Africa currently in the portfolio include:  Mozambi...
New/emerging industries being financed by the IDCIn the 2000s and in the future:•   Berries•   Cherries•   Persimmon•   Co...
Some of IDC‟s current projects in South Africa                             Co-financing early stage project development   ...
IDC involvement in Africa (outside SA): project funding approvals                                                         ...
The IDC: Corporate profile• Established in 1940, the IDC is a self -financing,  State-owned development finance institutio...
The IDC‟s vision, mission, objectives & outcomesVision             To be “the primary driving force of commercially sustai...
Achieving developmental objectivesFinancial year 2008/09:• Funding approvals amounted to R10.8 billion, up 27% on the  pre...
Industrial development approach• IDC addresses market failures / gaps by supporting investments, which  may otherwise not ...
Sectoral involvement Agriculture and Agro-processing Mining and Beneficiation Manufacturing       •   Metals       •   ...
Financial instruments•   IDC offers a wide array of financial instruments to    entrepreneurs, including :    –   Equity  ...
Financing criteria•   Financial assistance is provided for the development of    new businesses, expansions or rehabilitat...
Non-financial forms of business support• Training of entrepreneurs• Business support to entrepreneurs: IDC Business Suppor...
Funding broad-based BEE• IDC, as a major South African DFI, remains fundamental to the  national agenda to realise BBBEE o...
Approach to provincial & local development• Unlocking investment potential to address inequitable  regional socio-economic...
Recent developments in the global & local automotive industries• Worldwide automotive industry was caught in the eye of th...
South African economy: Most distressed major sectors within manufacturing                                                 ...
South African economy:Manufacturing sub-sectors reporting sharpest fall in production volumes              Sectors most im...
South African economy:Manufacturing - IPAP sector performance                                            2007             ...
South African economy:New vehicle sales plunging in 2009, but expected to recover                                         ...
South African economy:New passenger car sales worst affected in 2009                                      Growth in new ve...
South African economy:Imports sharply down, but expected to rise again in 2010                                          Pa...
Automotive Industry Executives‟ Perceptions ofFuture Changes in Market Share (KPMG / 2009)      100%                   7  ...
Assisting companies in distress• R6.1 billion set aside to assist distressed companies over the next two years• Approach t...
Assisting companies in distress (continued)  – Developmental returns should be measured and monitored  – Distress Funds re...
Funding within SOE Capex (2008/2009 FinancialYear)• Ca R81.2 million approved to four Transnet suppliers of locomotives, c...
IDC involvement in Africa (excl.SA): projects under considerationSENEGAL                                                  ...
South African economy:Mixed performance at a sub-sector level                                          • Supply-side of th...
South African economy:Manufacturing production in SA mirroring the global trend
Sectoral growth                  • Solid growth performance of the                    SA economy continued throughout     ...
Recent developments in the global & local automotive industries• Worldwide automotive industry was caught in the eye of th...
Vehicle sales, exports and production• Very buoyant domestic market in the mid  2000s• Exports have been the hallmark of t...
Automotive industry remains under pressure• Vehicle sales still under pressure but off   • Exports have fallen sharply as ...
Employment in Automotive Components and parts industry• Employment in the components and parts  segment declined markedly ...
Concluding remarks• South Africa and the rest of the African continent present  a myriad of business opportunities across ...
Vision and Mission                                        VisionTo lead in the development of the complete manufacturing d...
SBU Focus – IPAP2 Lead Sectors• Automotive Sector• Fabricated Metals, Capital and Transport Equipment Sector• Renewable En...
Automotive Sector  Doubling of local content in components  • Finance new 1-tier component manufacturers in South Africa  ...
Metal Fabrication, Capital and Transport Equipment SectorIncrease local content of SOE capex•Leverage upon Transnet and Es...
Renewable Energy Components Sector• Establishment of a local SWH manufacturing industry• Concentrated Solar Power componen...
Advanced Manufacturing Sector - What is it?• Advanced manufacturing (AM) is a collection of high value adding manufacturin...
Sector StrategyNuclear Build Programme•Fabrication and components supply into the nuclear build programme•Localisation and...
Rea leboga – Questions?
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Idc moroasereme ntsoane 2010

  1. 1. The IDC:Financing For DevelopmentUNIDO Rhythm/Working Group Meeting PresentationMoroasereme NtsoaneSBU Head011 269 3174 (tel) / moroaseremen@idc.co.za
  2. 2. Contents• IDC Corporate Profile• Development Finance Approach• Performance of automotive industries• IDC Assistance
  3. 3. Introducing the IDC• Established in 1940, the IDC is a self -financing, State-owned development finance institution• The vision of the IDC is to be the primary source of commercially sustainable industrial development and innovation to the benefit of South Africa and the rest of the African continent• Provides financing to entrepreneurs engaged in competitive industries and enterprises based on sound business principles• Pays income tax at corporate rates and dividends to the shareholder• Aims to maximise developmental and financial returns within an acceptable risk profile
  4. 4. Introducing the IDC (cont.)Vision To be “the primary driving force of commercially sustainable industrial development and innovation to the benefit of South Africa and the rest of the African continent” The IDC is a self-financing national development finance institution whose primary objectives are toMission contribute to the generation of balanced, sustainable economic growth in Africa and to the economic empowerment of the South African population, thereby promoting the economic prosperity of all citizens. The IDC achieves this by promoting entrepreneurship through the building of competitive industries and enterprises based on sound business principles.Objectives Supporting industrial development capacity Promoting entrepreneurship Sustainable employment Growing sectoral diversity Regional equity Growing SME sectorOutcomes Industrialisation in the rest of Africa Broad-based black economic empowerment Environmentally sustainable growth New entrepreneurs entering the economy
  5. 5. Introducing the IDC: industry development Food, Mining and Forestry, Wood, Clothing, Chemicals and Fabricated Construction Beverages and Beneficiation Paper Textiles Leather Allied Metals, Agriculture and Footwear Machinery and Transport Portfolio: Portfolio1: Portfolio: Equipment USD 123 mil Portfolio: Portfolio: Portfolio: USD 344 mil USD 2 675 mil USD 344 mil USD 147 mil USD 1 374 mil Portfolio: USD 209 mil1 Exposure as at 31 March 2009 at market values, including commitments, excluding listed investments not managed in SBUs 5
  6. 6. Introducing the IDC: industry development (cont.)Public, Private Transport, Media and Techno- Venture Healthcare Tourism Franchising Partnerships Financial and Motion Industries Capital and and Other Services Pictures EducationInfrastructure Portfolio: Portfolio: Portfolio: Portfolio: Portfolio: USD 405 mil USD 123 mil Portfolio: Portfolio: USD 233 mil USD 74 mil Portfolio: USD 380 mil USD 135 mil USD 430 mil USD 736 mil 6
  7. 7. Actively supporting business/industries in AfricaThe South African Government is committed to support economicdevelopment in South Africa and in the rest of Africa. As such, IDC‟s corestrategies for the continent aim to:  Leverage private sector investment for economic development throughout the continent;  Play a major role in the development of industrial capacity and promoting entrepreneurial activity;  Strengthen South Africa‟s constructive role in regional economic development;  Leverage foreign direct investment by bringing in foreign partners using international networks;  Promote supply of goods & services from SA;  Establish credit lines for financially sustainable regionally-oriented financial intermediaries;  Support NEPAD and regional spatial development initiatives (SDIs).
  8. 8. Financial instruments• IDC offers a wide array of financial instruments, including : – Equity – Quasi-equity – Commercial debt – Wholesale finance – Venture capital – Guarantees – Export and import finance – Credit lines to DFIs• These may be provided singly or in combination Flexible deal structuring
  9. 9. Financing criteria• Greenfield projects, expansions & rehabilitations• Minimum financing in South Africa  R1 million (USD125 000) and relatively sizeable projects elsewhere in Africa.• Profitability & sustainability within a reasonable time frame• Developmental impact (jobs, value addition, exports)• Fixed assets and the fixed portion of growth in working capital requirements• Reasonable financial contribution from owners• Security• Environmental standards
  10. 10. Role in project development• Co-sponsor feasibility studies• Identify project opportunities• Provide and arrange funding (e.g. export and import finance, equity and loan funding)• Identify suitable international and local DFIs, commercial and merchant banks and companies and export credit agencies as potential participants• Financial adviser in partnership with other financial institutions• Share project risk with the sponsors and financial partners• Identify strong operating partners• Off-take and supply agreements
  11. 11. Role in project development (cont.)• Assist with the early negotiations of project agreements to improve and ensure their bankability and shorten the funding schedule• Structure appropriate limited recourse funding packages by allocating project risk to the appropriate stakeholders• Assist with implementation via steering committee• Serve on board of directors• IDC does not seek shareholding control or management participation
  12. 12. Examples of early-stage project developmentSome of the projects under investigation include:– Solar power generation: A renewable energy project, serving as a pilot project and potential more roll-outs in future.– Natural fibres: Development of a sisal plantation to the benefit of local communities.– Electric vehicle batteries: Investigating the viability of establishing a large cell lithium-ion electric vehicle battery manufacturing facility in South Africa– Wind power generation: A wind farm project to produce 500 MW of power.– Bio-ethanol: Various bio-ethanol projects around the country.– Kenaf: Project to investigate the utilisation of Kenaf (a natural fibre) in the construction industry.– Electricity generation: Integrated coal mine and power project in Botswana.– Petrochemicals: Construction of a synfuels plant and associated infrastructure.– Platinum smelter and refinery: Early feasibility stage for establishing a PGM smelter and refinery. 12
  13. 13. Assisting our business partners during theeconomic crisisThe economic crisis is impacting businesses on various levels Consumer Unable to confidence lower, source finance Lower demand spending less from traditional for products and sources services Financial institutions Firm Business tightening credit confidence lower,criteria, extending cutting costs and less credit investing less Internal cash flow pressures Creditors and Lower levels of debtors under Excess stock foreign demand financial pressure build-up The IDC is assisting in filling the gap in the market left by financial institutions extending less credit to businesses and in so doing ensuring that jobs and capacity of viable businesses are being retained. The IDC is budgeting R11.4 billion of funding for approvals in the current financial year, R2.9 billion specifically to assist distressed businesses.
  14. 14. Financing of infrastructure projects• The IDC‟s Public-Private Partnerships Strategic Business Unit (PPP SBU) provides debt and/or equity funding for key infrastructure projects in sectors such as: – Power – Water – Telecommunications – Information technology – Transportation• Some of the major projects currently in the portfolio include: – Gautrain project (funding for Bombela consortium) – Neotel (second network operator) – Internet based control and communications equipment at all entrance points in D.R. Congo – Pebble Bed Modular Reactor (PBMR)
  15. 15. IDC‟s pipeline of infrastructure projectsSome of the major projects in Africa currently in the portfolio include: Mozambique: • Cahora Bassa hydro-electric power project Tanzania: • Ruhudji hydro-electric power project • Mchuchuma coal project Democratic Republic of Congo: • Inga 2 hydro-electric power project • Africa Union Financial Services (“AUFS”) Uganda: • Aswa Forest and Power Station • Kalangala infrastructure (transport, telecoms, power) Various countries: • Telecom submarine cable system • Satelite system for HDTV and telecom backhaul • Zim/Zam/Nam/Bots/SA transmission network. Cahora Bassa Dam: Mozambique
  16. 16. New/emerging industries being financed by the IDCIn the 2000s and in the future:• Berries• Cherries• Persimmon• Community pay-phones• Motion pictures• Diamond cutting & polishing• Bio-fuels• Composites• Biomass• New technologies• Owner-driver schemes• Boat-building• Tele-medicine etc..IDC also envisages a major role in funding:• Suppliers to state owned enterprises• Infrastructure/PPPs• Energy, including renewable• Resource beneficiation• New industry development• Expansionary black economic empowerment• Implementation of NIPF and IPAP
  17. 17. Some of IDC‟s current projects in South Africa Co-financing early stage project development • Rail transport infrastructure • Electro-activated water • X-ray machines • Rail transport • Cellular communications • Probiotictechnology • Energy from coal • Cut roses • Coking coal briquettes • Pectin • Barley and groundnuts • Biodiesel ?? • Ethanol • Chrome chemicals • Proxide production • Lime mine and kiln • Cut flowers • Peroxide production Silicon metal ?? • Macadamia nuts • Ferrochrome • Apple farming • Platinum • Alluvial diamonds • Walnuts • Cotton ginning • Cherries • Mandarines • Diamonds?? • Biomass pellets • Strawberries • Soya oil • Coal mining • Stainless steel • Forestry & sawmilling • Citrus • Renewable energy • Beta-carotene production • Abalone production • IDZ infrastructure • Lusernprotein production • Sugar production • Goat farming • Orchid production • Citrus • Cassava production • Abalone spat • Ethanol • Fruit & nuts (grapes & dates, • Biofuels pistachios) • Ceramic tile production • Cotton ginning • Power station • Citrus production • Toll roads • Ferrochrome • Aquaculture • Biological pest control • Fruit (figs & prickly pear, • Alcohol production • Vaccine production pomegranate) • Coal mining • Hoodiaprocessing • Leather tannery • Aluminium beneficiation • Vaccine power generation Nuclear production • Sugar beet • Forestry • Satellite launch technology • Aluminium smelter • Berries farming • Canola oil extraction • Berries farming Legend • Non-woven textiles • Fruit juice production • High pressure aluminium • Kenafcultivations & fibre production castings Pre-feasibility • Cold rolled steel • Rasberries Raspberries • Bio-reactor • Biomass– fuel pellets Feasibility • Fish processing • Wood processing Pre-implementation • Fruit & citrus (Blue berries, • Citrus farming • Fruit production Implementation persimmon, grapes)
  18. 18. IDC involvement in Africa (outside SA): project funding approvals EGYPT SUDAN KENYANIGERIA MALI • Agriculture/ • Infrastructure • Agro-• Telecoms • “Wood” paneling Bio-fuels (Water) processingCAPE VERDE ERITREA• Hospitality • Mining UGANDA • HospitalityGHANA• Hospitality MALAWI• ICT • Food and Agriculture TANZANIATOGO • Retail • Manufacturing• Financial services infrastructure. • FranchisingGABON SEYCHELLES• ICT COMOROS • Hospitality •Transport EQUATORIAL MAURITIUSCONGO GUINEA • Air transport(Brazzaville) • Transport D.R. CONGO• Transport • Energy MOZAMBIQUE • Mining CAMEROON • MiningNAMIBIA • Hospitality • ICT • Hospitality• Agric. / agro- • Infrastructure • Manufacturing processing • Agro-processing• Mining • Wood processing ANGOLA • Energy ZAMBIA • Energy • Ind. InfrastructureBOTSWANA • Storage and warehousing • Transport infrastructure• Hospitality • Storage & warehousing • Mining SWAZILAND• Restaurant • Healthcare LESOTHO • Basic chemicals • Financial • Agro-processing services • Telecoms • Infrastructure • Financial services
  19. 19. The IDC: Corporate profile• Established in 1940, the IDC is a self -financing, State-owned development finance institution• The vision of the IDC is to be the primary source of commercially sustainable industrial development and innovation to the benefit of South Africa and the rest of the African continent• Provides financing to entrepreneurs engaged in competitive industries and enterprises based on sound business principles• Pays income tax at corporate rates and dividends to the shareholder• Aims to maximise developmental and financial returns within an acceptable risk profile The IDC‟s Head Office in Sandton (Johannesburg)
  20. 20. The IDC‟s vision, mission, objectives & outcomesVision To be “the primary driving force of commercially sustainable industrial development and innovation to the benefit of South Africa and the rest of the African continent” The IDC is a self-financing national development finance institution whose primary objectives are to contribute to the generation of balanced, sustainable economic growth in Africa and to the economicMission empowerment of the South African population, thereby promoting the economic prosperity of all citizens. The IDC achieves this by promoting entrepreneurship through the building of competitive industries and enterprises based on sound business principles.Objectives Supporting industrial development capacity Promoting entrepreneurship Sustainable employment Growing sectoral diversity Regional equity Growing the SME sectorOutcomes Industrialisation in the rest of Africa Broad-based black economic empowerment Environmentally sustainable growth New entrepreneurs entering the economy
  21. 21. Achieving developmental objectivesFinancial year 2008/09:• Funding approvals amounted to R10.8 billion, up 27% on the previous year• Largest portion of funding (52%) for start-ups and expansions in South Africa• 39% increase in the number of approvals to 231• 69% of the total number of funding approvals to SMEs• Increased funding approvals to the rest of the African continent by 38% to R2.9 billion• The funding activities will facilitate in the creation of: – more than 24 200 direct new jobs in SA – around 5 000 in the rest of Africa• Funding of R500 million approved for distressed companies – 2 500 jobs expected to be saved
  22. 22. Industrial development approach• IDC addresses market failures / gaps by supporting investments, which may otherwise not happen, in partnership with private sector companies• IDC investments are for development purposes, with the ideal investment being one that generates developmental as well as financial returns• This entails taking a higher risk profile than commercial financiers in order to support the development of sectors and new entrepreneurs through …  Diversifying the economy through supporting a range of sectors  Encouraging the introduction and development of new industries and products  Developing internationally competitive companies  Supporting the establishment of greenfield developments  Supporting expansions of existing businesses  Facilitating the entry of new entrepreneurs and supporting their development  Supporting the growth and development of small and medium businesses into competitive players  Encouraging regional development by supporting companies with regional comparative advantages
  23. 23. Sectoral involvement Agriculture and Agro-processing Mining and Beneficiation Manufacturing • Metals • Chemicals • Textiles Services • tourism • IT and telecoms • media and motion pictures • healthcare & education • Transport, storage and financial services • venture capital • franchising • Construction and 2010 Infrastructure
  24. 24. Financial instruments• IDC offers a wide array of financial instruments to entrepreneurs, including : – Equity – Quasi-equity – Commercial debt – Wholesale & bridging finance – Share warehousing – Export/import finance – Short-term trade finance – Venture capital• These may be provided singly or in combination Flexible deal structuring
  25. 25. Financing criteria• Financial assistance is provided for the development of new businesses, expansions or rehabilitation of existing businesses• Business case must exhibit economic merit (i.e. it must be profitable)• Reasonable contribution expected from promoter/s• Minimum of R1 million• Security• Environmental compliance
  26. 26. Non-financial forms of business support• Training of entrepreneurs• Business support to entrepreneurs: IDC Business Support Programme was established to assist where appropriate: – potential clients in preparing a business plan; and – existing clients where e.g. shortcomings in the management capacity has been identified, if a short-term intervention is required, if it experiences financial difficulties. – The funding for the business support is borne partly by IDC• Support for community groups• Encouraging investments to address certain goals through incentives
  27. 27. Funding broad-based BEE• IDC, as a major South African DFI, remains fundamental to the national agenda to realise BBBEE objectives• IDC has developed critical skills and experience in financing BBBEE• To augment these BBBEE objectives and remain a significant player in BBBEE funding, job creation and BBBEE remain the overarching factors in all our funding activities:  facilitate ownership of businesses  ensure transfer of skills to enhance management capacity and entrepreneurship  advancement of HDSA employees (share and/or profit participation)  employment equity  procurement policies  women advancement in business
  28. 28. Approach to provincial & local development• Unlocking investment potential to address inequitable regional socio-economic development• Exploiting comparative advantage in sectors Development agencies• Addressing market gaps Approved agencies Applications received and assessed• IDC in discussion with provincial development corporations to address capacity building• Capacity building for third-tier government through development agencies (24 approved to date), primarily in rural areas• Expanding IDC‟s reach through offices in all provinces
  29. 29. Recent developments in the global & local automotive industries• Worldwide automotive industry was caught in the eye of the global financial storm• Governments in the US and Europe have intervened to help prop-up the industry• In addition, a variety of incentives have been introduced to boost sales across the world• The local market has seen a steep fall in motor vehicles sales since record sales of 2007• A number of components and accessories manufacturers have closed down• The number of dealerships has also reduced• Job losses have continued unabated since late 2008• In recent months, exports have slowed down considerably• In the first half of 2009 vehicle sales slumped by one-third relative to same period in 2008• Exports have fallen rapidly, with June figures showing a 52.5% decline on the same period last year
  30. 30. South African economy: Most distressed major sectors within manufacturing Volumes of Production Spare capacity changes Business confidence Average monthly % change Manufacturing sector (y-o-y) over 6-month period % change % point increase in Index point decline Current spare ending: from most spare capacity since since most recent capacity levels recent high Q3 „08 high Mar-08 Oct-08 Mar-09 Motor vehicles, parts and accessories 0.4 -0.7 -35.3 -49.2 29.2% 13 77 and other transport equipment 47.5% (iron & steel) 94 (fabricated metals) Basic iron and steel, non-ferrous metal 29.3 (iron & steel) -0.5 -3.7 -23.5 -27.5 24.4% (metal 77(basic metals) products, metal products and machinery 5.8 (metal products products) 77 (machinery) 9.6(other Furniture and other manufacturing 15.3% (other 9.3 6.0 -14.9 -29.1 manufacturing) 77 (furniture) division manufacturing) 23.4% (textiles) 4.2 (textiles) 59 (textiles) Textiles, clothing, leather and footwear 6.5 -2.5 -11.7 -23.8 29.6% (leather) 7.4 (leather) 48 (clothing) Glass and non-metallic mineral products 3.2 -2.0 -10.9 -20.5 19.8% (non metallic) 6.2 (non metallic) 86 (non-metallic) Petroleum, chemical products, rubber 17.5% (basic 72 (plastics) 7.6 9.8 -7.2 -15.4 4.4 (basic chemicals) and plastic products chemicals) 64 (chemicals) Wood and wood products, paper, 17.3% (wood & 4.2 (wood & wood 100 (wood) 0.0 2.4 -7.0 -17.3 publishing and printing wood products) products) 82 (printing); 50 (paper) Radio, television and communication 2.9 3.0 -5.2 -17.1 N/A N/A N/A apparatus and professional equipment Food and beverages 3.0 4.0 2.7 -6.8 N/A N/A 81 (beverages); 78 (food) Electrical machinery 11.3 11.6 4.7 -8.6 19.5% 1.2 83 Total manufacturing 3.3 2.3 -13.2 -21.6 21.4% 6.5 67Source: IDC analysis
  31. 31. South African economy:Manufacturing sub-sectors reporting sharpest fall in production volumes Sectors most impacted upon experienced a steep fall in production activity Most distressed sectors in manufacturing (6 month to March 09 average y-o-y % change ) Basic iron and steel Parts and accessories Motor vehicles Insulated wire and cables Leather and leather General purpose machinery Bodies for motor vehicles Other textile Sawmilling and planning of wood Other manufacturing Structural metal Non-metallic mineral Basic chemicals Special purpose machinery Publishing -50 -45 -40 -35 -30 -25 -20 -15 -10 -5 0 Source: StatsSA %
  32. 32. South African economy:Manufacturing - IPAP sector performance 2007 2008 Manufacturing output growth by sub-sector in 2007 Manufacturing output growth by sub-sector in 2008Total Manufacturing Total Manufacturing Textiles Textiles Clothing Clothing Basic chemicals Basic chemicals Other chemicals Other chemicals Plastic products Plastic products Paper products Paper products Furniture Furniture Metal products Metal products Machinery Machinery Transport equip. Transport equip.Automotives & parts Automotives & parts -2 0 2 4 6 8 10 12 14 16 -10 -5 0 5 10 15 20 25 Source: Stats SA % Change Source: Stats SA % Change
  33. 33. South African economy:New vehicle sales plunging in 2009, but expected to recover New Vehicle Sales and Domestic Production 700 Domestic Production Forecast 600 Domestic sales of local production CBU Imports Exports 500 Units (000) 400 300 200 100 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source: Naamsa
  34. 34. South African economy:New passenger car sales worst affected in 2009 Growth in new vehicles sales 40% Forecast 30% Passenger Light Commercial Medium and Heavy Commecial 20% 10% 0% -10% -20% -30% 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source: Naamsa
  35. 35. South African economy:Imports sharply down, but expected to rise again in 2010 Passenger and light commercial vehicle imports 350 Forecast 300 Total imports Passenger vehicle Light commercial vehicle 250 Units (000) 200 150 100 50 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source: Naamsa
  36. 36. Automotive Industry Executives‟ Perceptions ofFuture Changes in Market Share (KPMG / 2009) 100% 7 6 10 11 10 14 14 15 17 90% 12 16 28 30 32 30 36 80% 22 22 28 26 70% 63 43 69 45 73 60% 51 Decrease 39 37 50% Remain the same Increase 48 53 44 40% 81 78 68 67 30% 62 60 24 43 12 21 20% 40 33 33 32 10% 20 20 17 15 13 10 0% ia a da n r n ds hi en at s ds i rd es ds W uj le or t oe sa /K is yo Fi Fo BM /F an an d an ys on ag ot ub is ce i tr i To ru da hr br br br H sw M N /C i ts er ba C n lt/ n al n se lk ot yu M M au a a Su er Vo ge ne di si H en en us In u hi Pe R G R C
  37. 37. Assisting companies in distress• R6.1 billion set aside to assist distressed companies over the next two years• Approach to funding companies in distress: – To ensure long term sustainability of enterprises: interventions will be on a firm by firm basis. – Focus will be on companies that are experiencing difficulties/distress due to cyclical downturn – Business must prove historical viability, and demonstrate structural improvements that will enhance long term competitiveness. – Businesses being assisted should demonstrate that the business case re-emerges within a reasonable timeframe, once global/domestic conditions improve. – Interventions should be to the benefit of the company being assisted and not relieve existing shareholders or other financiers from their obligations.
  38. 38. Assisting companies in distress (continued) – Developmental returns should be measured and monitored – Distress Funds recipients should seek to save jobs, without sacrificing viability, and proper consultative procedures must be observed where job losses are unavoidable. – Risk sharing must be demonstrated between all stakeholders (viz. shareholders, creditors, debtors, employees and management) – enable the IDC to leverage its balance sheet further
  39. 39. Funding within SOE Capex (2008/2009 FinancialYear)• Ca R81.2 million approved to four Transnet suppliers of locomotives, coaches, seats and other products• Ca R71.6 million approved to three Eskom suppliers of electric motors, generators, transformers and ventilation systems• A few others have been rejected due to lack of confirmed offtakes from SOE’s
  40. 40. IDC involvement in Africa (excl.SA): projects under considerationSENEGAL EGYPT• Transport • Agriculture • Bio-dieselGUINEA SUDAN(Conakry) • Water supply• Mining NIGER UGANDA • Meat • Infrastructure KENYA processing •EnergyLIBERIA • Infrastructure •Mining• Mining • Energy • Agro-processingGHANA• Energy MALAWI• Agro-processing •Mining •Food processingCONGO (Brazzaville) RWANDA• Mining • Energy TANZANIA• Infrastructure •Energy •Agro -processingD.R. CONGO•Telecoms MAURITIUS•Energy NAMIBIA •Telecoms•Mining •Mining •Financial servicesZAMBIA MADAGASCAR•Mining BOTSWANA • Mining•Energy • Energy •Rail MOZAMBIQUEZIMBABWE •Refinery•Sawmilling LESOTHO •Forestry•Energy •Agro-processing •Energy•Infrastructure •Agro-processing
  41. 41. South African economy:Mixed performance at a sub-sector level • Supply-side of the economy (agriculture, mining and manufacturing) has been hardest hit by the unfolding crisis as not only domestic demand came under pressure, but also due to a sharp drop in export demand. • The manufacturing sector suffered severely as key sectors such as base metals (e.g. iron & steel, fabricated metal products and machinery & equipment) and the transport equipment sector (incl. motor vehicles & parts) contracted sharply. • The construction sector still managed to report a sterling performance considering the circumstances as this sector benefitted from the substantial public sector capex programme. • Sharply weaker consumer spending took its toll on the trade sector, particularly on the motor trade and retail trade segment. • However, a recovery is visible in certain segments of the economy, with month-on- month production increases being reported in the mining and manufacturing sector in recent months.
  42. 42. South African economy:Manufacturing production in SA mirroring the global trend
  43. 43. Sectoral growth • Solid growth performance of the SA economy continued throughout 2007. • Construction sector reported the strongest growth, underpinned by increased building construction activity and high levels of fixed investment across most economic sectors. • The strong consumer boom was reflected in high growth rates in the trade and financial service sectors. • The brisk growth in the manufacturing sector was mainly due to strong domestic demand as exporters faced a challenging global trading environment. • Mining activity has been adversely affected by a continued decline in gold production, although partially offset by the excellent performance of the platinum sub- sector.
  44. 44. Recent developments in the global & local automotive industries• Worldwide automotive industry was caught in the eye of the global financial storm• Governments in the US and Europe intervened to help prop up the industry• In addition, a variety of incentives have been introduced to boost sales across the world• The local market has seen a steep fall in motor vehicles sales since record sales of 2007• A number of components and accessories manufacturers have closed down• The number of dealerships has also reduced markedly• Job losses have continued unabated since late 2008 and is expected to stabilise• In 2009 motor vehicle sales slumped by 30% relative to 2008• Exports also declined 38.4 per cent to 174 947 in 2009• Similarly passenger car imports declined by 20.7 per cent during the same period• BMW and VW recently announced R2.2 billion and R3.5 billion investment plan respectively, which should help boost demand for inputs also assisting suppliers to survive the current tough environment
  45. 45. Vehicle sales, exports and production• Very buoyant domestic market in the mid 2000s• Exports have been the hallmark of the industry‟s performance over the last decade and a half• Poor performance over the last two years• Steep decline in 2009 but recovery is also forecast• Expected recovery over the next two years• Domestic production has been partially underpinned by exports• Growth local in demand was to an extent satisfied by imports• Domestic production in 2009 stood at 373 923 units, the lowest since 2001
  46. 46. Automotive industry remains under pressure• Vehicle sales still under pressure but off • Exports have fallen sharply as global worst levels as consumers take strain conditions deteriorated. Consumer from a high debt burden, tighter credit demand under stress globally. conditions, declining disposable income and increased job losses.
  47. 47. Employment in Automotive Components and parts industry• Employment in the components and parts segment declined markedly since the 2008 peak• Contract employees bore the brunt of the decline in demand• A number of established components manufacturers closed down leaving thousands out of work• NAACAM reported that between September 2008 and Q1 2009 some 17 000 jobs were lost in the components industry• Metair alone fired 3 500 employees since the onset of the crisis
  48. 48. Concluding remarks• South Africa and the rest of the African continent present a myriad of business opportunities across numerous sectors of economic activity.• Investment activity expected to experience a slowdown in 2009, largely due to the ramifications of the global crisis, but outlook remains positive as recovery gathers momentum• FIFA World Cup in 2010 should provide a significant stimulus.• Certain challenges remain, but the South African Government is strongly committed towards a continued improvement in the investment environment going forward.• The IDC, as the state-owned development financier focused on the expansion of the industrial capacity of South Africa and the rest of the African continent, would like to be your development finance partner !
  49. 49. Vision and Mission VisionTo lead in the development of the complete manufacturing downstream value-chain of the ferrous and non-ferrous metals MissionTo develop and support viable downstream developments and value-adding to ferrous and non-ferrous metals to improve competitiveness and increase the capacity of the metals industry in South Africa and the rest of Africa by working pro-actively, cost- effectively and taking a more risk –tolerant approach.
  50. 50. SBU Focus – IPAP2 Lead Sectors• Automotive Sector• Fabricated Metals, Capital and Transport Equipment Sector• Renewable Energy Components Sector• Advanced Manufacturing Sector
  51. 51. Automotive Sector Doubling of local content in components • Finance new 1-tier component manufacturers in South Africa • Secure investment by Asian OEM • Finance capacity expansion at existing components manufacturers • Increase local content of electronics, interior, body panel and engine components Production of the electric car (Joule) • Establishment of a electric vehicle industry in South Africa • Establishment of an energy/fuel plan to support electric car industry Buses, Taxis, medium and heavy commercial vehicles • Leverage public transport procurement to generate enough demand for a viable local assembly of buses • Leverage the extensive procurement in the taxi industry to attract a taxi assembly plant locally •Enhance existing capacity of local industry to assemble commercial vehicles and “yellow goods”
  52. 52. Metal Fabrication, Capital and Transport Equipment SectorIncrease local content of SOE capex•Leverage upon Transnet and Eskom strategic procurement to develop globally competitive local industry•Utilise CSDP and Unido Program to attract OEMs to set up locally•Identify and exploit CSDP opportunities from municipalities and other private sectorResuscitate Foudries and Tool, Die and Mould (TDM) industries by 2020•Roll-out of the National Foundry Technology Network Programmes•Development of an internationally competitive tooling cluster in South Africa•Scrap metal beneficiation to form either billets or coils, and thereby reduce exportation of local scrap metal.Innovative Financing Programme for OEMs and local suppliers by 2011• Design a funding instrument/scheme to increase participation levels of local suppliers in the SOE capex
  53. 53. Renewable Energy Components Sector• Establishment of a local SWH manufacturing industry• Concentrated Solar Power components manufacturing• Wind energy components manufacturing• Photovoltaic components manufacturing
  54. 54. Advanced Manufacturing Sector - What is it?• Advanced manufacturing (AM) is a collection of high value adding manufacturing processes, management techniques, technologies and knowledge capital that occupy the top-tier in manufacturing industries and drive competitiveness in the local and global economies.• A combination of the following concepts are typically associated with AM: – Focused R&D & Innovation – Intellectual Property – Sophisticated computer controls, – Concentrated bodies of expertise, – Advanced processes, – High value products, – Processes, products and technologies that are not easily replicable, – Industry leading /industry changing concepts. Advanced manufacturing is also associated with mastering highly regulated safety and/or quality requirements, the exploitation of intellectual property in the form of world class processes, products and services.
  55. 55. Sector StrategyNuclear Build Programme•Fabrication and components supply into the nuclear build programme•Localisation and technology transfer partnerships with multinationals•Fuel Supply facility•Development of non-energy nuclear applicationsAdvanced Materials•Development of advanced material value chainAerospace• Integration of local industry into the global value chain•Development of tier-2 and tier-3 suppliers•Consolidation of the Centurion Aviation Village cluster
  56. 56. Rea leboga – Questions?

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