1<br />Who Are WE ?<br />The IDC was established in 1940, we are a national development finance institution set up to prom...
Professionalism, </li></li></ul><li>Our Objectives and Strategies<br />Supporting industrial development capacity<br />Obj...
Identifying and supporting opportunities not addressed by the market; and
Providing risk capital in partnership with the private and public sector.</li></li></ul><li>Differentiation: IDC vs. comme...
Financial instruments<br /><ul><li>IDC offers a wide array of financial instruments, including :
Equity (Ordinary Shares)
Quasi-equity (SH Loans, Prefs)
Commercial debt (Term Loans)
Wholesale finance
Venture capital
Guarantees (perf. and OD)
Contract, fast track, Revolving Credit Facility or trade finance (up to 18 months term)
Export and import finance
Combination or mix of the above</li></li></ul><li>5<br />Our Requirements and General Funding Criteria<br /><ul><li>Projec...
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Idc sector workshop presentation_29092011


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Presented at the UNIDO-SPX Rhythm meeting on 29 September.

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Idc sector workshop presentation_29092011

  1. 1. 1<br />Who Are WE ?<br />The IDC was established in 1940, we are a national development finance institution set up to promote economic growth and industrial development. We are owned by the South African government under the supervision of the Economic Development department.<br />Our mission<br />The IDC's primary objectives are to contribute to the creation of balanced, sustainable economic growth in South Africa and on the rest of the continent.<br />We promote entrepreneurship through the building of competitive industries and enterprises based on sound business principles.<br />Our vision<br />We aim to be the primary source of commercially sustainable industrial development and innovation to benefit both South Africa and the rest of Africa.<br />Our values (Our Core Personality)<br />Everything we do is directed by our values which are:<br /><ul><li>Passion,
  2. 2. Partnership,
  3. 3. Professionalism, </li></li></ul><li>Our Objectives and Strategies<br />Supporting industrial development capacity<br />Objectives<br />Promoting entrepreneurship<br />Growing sectoral diversity<br />Sustainable employment<br />Growing SME sector<br />Regional equity<br />Broad-based black economic empowerment<br />Industrialisation in the rest of Africa<br />Outcomes<br />New entrepreneurs <br />Environmentally sustainable growth<br />Our Core Strategies (How we get there)<br /><ul><li>We serve as a catalyst for balanced, sustainable development;
  4. 4. Identifying and supporting opportunities not addressed by the market; and
  5. 5. Providing risk capital in partnership with the private and public sector.</li></li></ul><li>Differentiation: IDC vs. commercial financiers<br />3<br />
  6. 6. Financial instruments<br /><ul><li>IDC offers a wide array of financial instruments, including :
  7. 7. Equity (Ordinary Shares)
  8. 8. Quasi-equity (SH Loans, Prefs)
  9. 9. Commercial debt (Term Loans)
  10. 10. Wholesale finance
  11. 11. Venture capital
  12. 12. Guarantees (perf. and OD)
  13. 13. Contract, fast track, Revolving Credit Facility or trade finance (up to 18 months term)
  14. 14. Export and import finance
  15. 15. Combination or mix of the above</li></li></ul><li>5<br />Our Requirements and General Funding Criteria<br /><ul><li>Projects must show economic viability and financial sustainability;
  16. 16. must fit into the IDC's mandated sectors; and should not be less that R1-million and not more than R1 </li></ul>billion.<br /><ul><li> Any form of security or collateral if available ( normally start-ups and distress businesses offer zero </li></ul> security cover but still get our full funding support where key merits are present)<br /><ul><li>Compliance with international environmental /standards.
  17. 17. The project/business must exhibit economic merit in terms of profitability and sustainability.
  18. 18. The IDC does not re-finance fixed assets since our aim is to expand the industrial base.</li></li></ul><li>Continued,<br />6<br />Take-overs and buy-ins by historically disadvantaged people<br /><ul><li>A signed Offer to Purchase agreement between the seller and the buyer or a signed Letter of Undertaking from the seller indicating the buyer's preferred bidder status.
  19. 19. The Offer to Purchase should be valid for at least three months and give the IDC an exclusivity period of at least two months.
  20. 20. Detailed information on the partners, such as the group structure and business activities.
  21. 21. An independent valuation (including underlying assumptions) of the target company.
  22. 22. Details of IDC funding and the application thereof.
  23. 23. Details of the contribution by the purchaser.
  24. 24. A signed draft plan explaining involvement of historically disadvantaged people in operational and/or executive management.
  25. 25. Proof of limited scope of due diligence performed by historically disadvantaged people on the seller's business.
  26. 26. A business plan.
  27. 27. Latest audited financials, management accounts and financial projections for the target company.
  28. 28. A covering letter with details of the finance required from the IDC.</li></ul>Expansions by existing businesses<br /><ul><li>Latest audited and actual financials (signed by the finance director, MD or CEO).
  29. 29. Your updated business plan focusing on the proposed project/expansion.
  30. 30. A detailed description of the nature of expansion, its related costs and revenues.</li></li></ul><li>7<br />Business Sectors Supported by the IDC <br /><ul><li>green industries, which includes renewable energy, energy efficiency, pollution mitigation, waste management and recycling, and bio-fuels;
  31. 31. agricultural value chain, including agro-processing;
  32. 32. manufacturing, focusing on advanced manufacturing; automotive, components, medium and heavy commercial vehicles manufacturing; clothing textiles, footwear and leather; forestry, paper and pulp, and furniture; metals fabrication, capital and transport equipment; pharmaceuticals; plastics and chemicals;
  33. 33. mining value chain, including downstream mineral beneficiation, mining and mining technologies;
  34. 34. tourism and high-level services, which includes business process services and tourism ;
  35. 35. media and motion pictures, which has to do with media pictures production, the media value chain of broadcasting (radio and television), media expansion including new media, music value chain, and film production and animation; and
  36. 36. the knowledge economy, to do with health care, information and communications technology and biotechnology.</li></li></ul><li>8<br />IDC Credit Application Appraisal Process (Non – Complex Transactions) <br />Enquiry Stage (by you) – ca. 1 day<br />Business Plan Preparation and Submission Stage (by Company Rep) – up to 30 days <br />Basic Assessment Stage(by IDC Deal Maker) – ca. 15 days<br />Due Diligence Stage (by IDC team at your site) – ca. 5 days <br />Submission Report Preparation (by the IDC Team) – 5 days<br />Legal Agreements and Payment Stage– minimum of 5 days<br />FYI: We want to improve our TAT to 15 days after DD<br />
  37. 37. 9<br />Metals, Transport and Machinery Products SBU<br />Our Metal, Transport and Machinery Products Strategic Business Unit offers funding and industry and project development support to ferrous and non-ferrous metal-based manufacturing businesses.<br />Our operations are in line with the government's New Growth Path and Industrial Policy Action Plan.<br />We focus on specific sub-sectors, namely: fabricated metal, capital and transport equipment, automotive assembly (including medium and heavy commercial vehicles, buses and taxis, and components, advanced manufacturing, and renewable and energy-saving industry components.<br />While each proposal submitted to us for funding is considered on its particular merit, preference is given to: <br /><ul><li>Financing fixed assets and the fixed portion of growth in working capital requirements; and
  38. 38. New or existing projects or businesses that have a significant developmental impact, for example, rural development, empowerment, job creation, township development and value addition.</li></li></ul><li>10<br />Of importance, is the IDC Development Funds<br />The funds currently managed are: <br /><ul><li>Gro-E Scheme (equity and loan based);
  39. 39. UIF (onlyloan based)
  40. 40. EU, Risk Capital Facility Programme, only equity based;
  41. 41. Support Programme for Industrial Innovation, (SPII)
  42. 42. Transformation and Entrepreneurship Scheme, only equity based</li></ul>Target beneficiaries herein are previously disadvantaged groups, including women, people with disabilities, low income worker groupings and marginalized communities. ( e.g for Community Trust and Foundations, Co-operatives, Workers Trust, Black and White Manco establishments) <br />The objective here is to support projects that will eventually contribute to the development of the economy through: <br /><ul><li>Job creation;
  43. 43. Developing small and medium enterprises;
  44. 44. Developing rural areas and underdeveloped provinces and regions; and
  45. 45. Boosting Broad-based Black Economic Empowerment and empowering people who were previously excluded from participating in the economy.
  46. 46. Many of selected projects under these funds are generally considered high risk and are therefore ring-fenced.</li></li></ul><li>Overview of Key Development Funds<br />11<br />
  47. 47. GRO – E SCHEME<br />R10 billion, ring-fenced, on-balance sheet<br />Available for 5 years or until scheme is exhausted<br />Objective: <br />to encourage employment creation, thereby expanding South African production capacity<br />Qualifying Criteria: <br />the business must have economic merit, i.e. it must have prospects of acceptable profitability to service its obligations<br />for the duration of funding period cost per job created or saved must not exceed R500,000 relating to total funding required by the business.<br />BBBEE certification is required from an accredited verification agency, where applicable<br />only available to businesses operating in or expanding in South Africa. <br />
  48. 48. GRO – E SCHEME cont …<br />Funding provided:<br />across all IDC mandated sectors<br />for start-up businesses includes funding for buildings, machinery and working capital<br />for existing businesses, funding for expansionary purposes<br />minimum of R1 million with a maximum of R1 billion per project, excess can be accessed through IDC’s normal funding<br />with IDC’s normal fees are applicable<br />Own contribution will be determined by the financial capacity of the entrepreneur and the cash flow profile of the business<br />First draw must occur within 1 year from approval of funding by the IDC or pricing reverts to normal IDC pricing<br />Pricing - interest rate for loan products will be Prime less 3% for 5 years, thereafter normal IDC pricing will apply<br />Rate of return for equities and sharing in the upside will depend on the development impact of the business<br />
  49. 49. (UIF) UNEMPLOYMENT INSURANCE FUND<br /><ul><li>A R2 billion unsecured 5-year listed private placement bond subscribed by the Unemployment Insurance Fund
  50. 50. Objectives:
  51. 51. to contribute towards sustainable job creation and retention by supporting job creating transactions while providing concessionary funding
  52. 52. Investment Criteria:
  53. 53. Fall within the sectoral focus areas of IDC within South Africa
  54. 54. Permanent job creation/retention at maximum of R450k per job
  55. 55. interest rates between 6.0% fixed, based on the risk and developmental impact in the transaction
  56. 56. Minimum funding amount of R1 million, Maximum R100 million
  57. 57. Financing instruments: debt
  58. 58. First drawdown by client within 7 months after approval</li></li></ul><li>WE THANK YOU <br />QUESTIONS AND CONCERNS IF ANY!<br />NB: Business plans will always be welcome and must be forwarded to:<br />Within any ferrous and non-ferrours Metals Sector: <br />titust@idc.co.za or zubairh@idc.co.za<br />011 (269) 3000<br />for other business sectors, general IDC Contact Details are:<br />Call Centre: 086 069 3888 <br />Website: www.idc.co.za<br />15<br />