Geoffrey Qhena Chief Executive Officer 16 April 2014

1. Geoffrey QhenaChief Executive Officer16 April 2014

2. Introduction IDC was established in 1940 to spearhead the development of industrial capacity. As our environment changed over the decades IDC changed with it, and many times throughout our history, we were instrumental in changing our environment though industrial development. IDC develops industries through financial support to entrepreneurs wanting to take advantage of opportunities not readily supported by commercial funders and developing and funding projects where the perceived risks are too high for the private sector to invest on its own. In many instances IDC’s support for an industry will lead the way, demonstrating the viability of a sector and then commercial institutions will enter the market. IDC investments to develop industry are always made taking into account the ultimate impacts that these investments will have on the people. This presentation highlights the impact that IDC has had over the past 20 years since South Africa’s transformation to a democracy.

3. 20 years of change Even as we celebrated the change in 1994, there were many challenges ahead. IDC positioned itself to address these and has responded to new challenges throughout the years. 1990s Early and mid 2000s Late 2000s & 2010s • Change in government • South Africa admitted to a globalised world • Addressing the disparities created by apartheid • Unemployment • Diversification of economy • Reducing inequalities • Infrastructure constraints • Recession • New Growth Path, Industrial policy and National Development Plan • Mandate overlap of DFIs • Growing financial sector liquidity • Climate change SA Priorities • Black economic empowerment • Moves to encourage regional integration • Improving competitiveness and export promotion • Services related industries • Investments elsewhere in Africa • Job creation • Developing rural areas and other previously underdeveloped regions • Downstream industries • Entrepreneurial development • Sector strategies • Focus on NDP, NGP and IPAP2 • Phasing out funding to service industries not aligned to priorities • Job creation through development of key sectors/value chains • Expansionary and broad-based BEE • Funding to distressed companies IDC Response

4. Overall achievements

5. Value of funding provided Value of Funding Approved for South African Investment • R128 billion (R204 billion in 2013 prices) of funding approved over the past 20 years of which R112 billion (R178 billion in 2013 prices) was for South African projects. • This represents 3.1% of gross fixed capital formation (investment) by the private sector in SA over the period. • Assuming that IDC provided one-third of funding for projects on average, IDC leveraged 9.4% of total private sector investment over the period. • Sectors that received the highest portion of funding were: • Basic metals; • Mining; and • Upstream chemicals • High levels of funding largely driven by large capital intensive nature of these industries. Data adjusted for inflation and cancellations of funding approvals

6. Job creation Direct Impact on Jobs in South Africa for IDC’s Funding Activities • Job creation is the most important development outcomes that IDC aims to achieve. • Impact extends beyond projects funded directly, e.g.: • Beneficiating minerals creates downstream opportunities; • Renewable energy projects create opportunities for components and other inputs. • Encouraging the creation of decent jobs by insisting on compliance with labour legislation and good working conditions. • Direct impact on job creation estimated at 360 000 over the period with 43 000 more saved. Industries creating the most jobs included: • Agriculture and agro-processing; • Mining; • Textiles and clothing. • Indirect impact of projects supported by IDC estimated at 960 000 jobs.

7. Black economic empowerment IDC Funding to Black-Empowered Companies • IDC’s approach to black-economic empowerment changed over the years and has stressed different facets: • Transfer of ownership; • Community and workers’ empowerment; • Expansionary BEE; • Black industrialists. • The approach was driven by several principles: • Redistribution of ownership in the economy; • Broadening the impact of empowerment; • Expansion of the economy; • Ensuring that all people are driving growth in the economy. • More than R48 billion (R64 billion in 2013 prices) approved for funding black empowered companies over the period. • Successes in assisting black industrialists in: • Consumer chemicals; • Transport equipment; • ICT; • Film.

8. Regional development • Regional development for IDC encompasses development of poorer provinces, rural areas and industrialisation in the rest of Africa. • Successes in development of rural areas by investing in: • Tourism; • Agriculture; • Mining; • Renewable energy. • The first decade of the last 20 years saw the Western Cape receiving the bulk of funding: • Driven by projects such as Saldanha Steel, Duferco and Atlantis Diesel Engines. • Funding over the last 10 years benefitted less industrialised provinces such as the Northern Cape with large mining and renewable energy investments. IDC Funding to Rural Projects

9. Small and medium enterprise development • Small and medium enterprises are important for the development of an economy because they create jobs more efficiently and are sources for innovation. • A few large conglomerates dominate the South African economy. • Over the last 20 years, more than 70% of the number and 18% of the value of funding approvals that IDC made was for small and medium enterprises. • Wholesale funding and franchising played an important role in IDC’s SME development in the first half of the 2000s. • IDC’s approach to SME development also includes technical support to businesses. • The establishment of sefa as a subsidiary of IDC will see IDC focussing more on larger interventions in the future. IDC Funding to SMEs Projects

10. Countercyclical funding • The global economic crisis in 2008 and the ensuing recession resulted in many companies coming under pressure from a number of fronts: • Financial institutions were tightening credit criteria, and extending less credit; • Lower demand for products and services from clients as confidence declined; • Internal cash-flow pressures. • IDC responded to the challenge by making available R6.1 billion to distressed companies while commercial funders were reducing credit extension. • To date, 90% of this funding had been committed, impacting on 44 000 jobs. Sectoral Distribution of IDC Funding to Distressed Companies

11. Exports and assisting companies to globalise • IDC has played an important role in diversifying and growing South Africa’s export basket. • Industries that contributed to this included the mining industry, especially the platinum industry, basic metals, motor vehicles, table grapes and other fruit. • Over the years, IDC had made available several special schemes that aimed at bolstering exports: • During the mid to late 1990s, these included the LIFE (Low Interest for Exports) scheme and the ORCHARDS scheme. During the mid 2000s, another scheme at developing orchards, the Pro-Orchards Scheme was established. • Apart from assisting local companies to enhance exports, IDC also provides an export finance product to provide finance to companies in the rest of Africa for the purchase of South African goods and services. • Africa provides a huge opportunity for South African companies to expand their market and production capacity. Some examples of IDC investments include: • Poultry in Namibia; • Cement in Ethiopia; • Management of the agricultural component of a bioethanol project in Sierra Leone.

12. Industry impact

13. Mining and mineral beneficiation Contributions to SA mining production IDC achievements in the sector: Diversification of the mining industry • Establishing new iron ore, platinum, coal, chrome, phosphate, manganese and diamond mining operations. Beneficiation of minerals • Expanding and establishing capacity in carbon steel, stainless steel, ferrochrome, phosphate concentration, phosphoric acid, aluminium, rolled aluminium products, cold-rolled and galvanised steel, and direct reduced iron. Restructuring the steel industry • Unbundling of Iscor and at a later stage Kumba Iron Ore. • Introducing strategic partners in carbon steel and stainless steel producers. • Establishing smaller steel mills. • Establishing capacity for alternative sources of iron for the steel making process. Transformation of the mining industry • Promoting BEE ownership and participation in gold, platinum, and chrome mining. 1994 2013

14. Green economy IDC achievements in the sector: Reducing the carbon intensity of the economy • Investing in renewable energy generation projects as part of government’s Renewable Energy Independent Power Producers (REIPP) Programme . Improving competitiveness • Funding companies to install equipment that allows them to be more energy efficient. Alleviating constraints to electricity supply • Renewable energy investments have a shorter construction time compared to base-load power stations. • Interventions that reduce demand for electricity. Environmental protection • Recycling and waste management. Establishing of new manufacturing industries • Assembly of photo-voltaic panels. • Manufacturing of wind towers. • Production of solar water heaters. Projects awarded and IDC participation in rounds 1 to 3 of the REIPP programme Source: DoE, IDC

15. Forestry value chain IDC achievements in the sector: Productively utilising land not suitable for agriculture • Establishing new forestry plantations. Beneficiation of timber • Establishing of pulp and paper mills and paper converters. Increasing international competitiveness • Restructuring and consolidation in the forestry industry. • Upgrading sawmills. • Research and development by our clients. Ensuring inputs into mining and housing development • Expanding sawmilling capacity.

16. Clothing, textiles, leather and footwear IDC achievements in the sector: Stabilising the industry and increasing competitiveness • Funding to distressed companies to allow them time to restructure and improve efficiencies. • Competitiveness enhancements through new equipment. • Mergers between different players to gain economies of scale. • Close cooperation with policy-makers and participation in design of incentives. • Management of dti incentives and providing IDC special funding. • Supporting companies operating in competitive niches to grow. Strategic alignment between producers and retailers • Supporting the development of stronger relationships throughout the value chain. • Introducing new business models for suppliers to take advantage of close proximity to retailers.

17. Motor vehicles and other transport equipment Exports of Completely Built Up Cars, Light, Medium and Heavy Commercial Vehicles IDC achievements in the sector: Helping to create a competitive cluster of industries • Funding to OEMs creating demand for locally produced components drawing from various intermediate industries. • Supporting first and second tier component manufacturers as well as their suppliers. • Funding for manufacturers of trucks and busses. Supported the industry through the global economic downturn • Funding to distressed companies throughout the economic downturn when commercial financiers would not provide funding. Building the other transport equipment industry • Funding to companies involved in the railway equipment, boatbuilding and aerospace industries. Source: NAACAM • R9.7 billion in funding approved1 • Impacting on 19 000 jobs 1 2013 prices

18. Agro-industries IDC achievements in the sector: Maximising the value created from agricultural land • Development of new high-value agricultural industries such as: • The lower Orange River early table grape industry; • Expanding the citrus industry, especially in black-spot free areas; • Growth and diversification of the berry industry; • Establishment of macadamia, walnuts and pecan nut industries; • Development of the marine aquaculture industry (cob and abalone); • Investment in businesses producing niche products (persimmons, gluten free products, new fruit varieties, peppadew) • Incorporating small-scale black farmers into the agro-processing value chain. • Value addition to agricultural products by supporting processing industries. Increasing food security • Increasing local production of imported processed goods e.g. processed soya and canola oil. • R13.2 billion in funding approved1 • Impacting on 84 000 jobs 1 2013 prices

19. Downstream chemicals and pharmaceuticals IDC achievements in the sector: Building a consumer chemicals industry • Support for establishment and expansions for companies manufacturing beauty products, household detergents and paints. Supporting security of supply in the pharmaceutical industry • Establishment of a project to supply vaccines. • Assisted with the expansion of manufacturing of generic pharmaceuticals. • Assisted contract manufacturers of pharmaceuticals to upgrade facilities to be compliant with regulations. Ensuring the manufacturing industry has access to intermediate products • Expanding industries such as packaging etc.

20. Film Average number of locally produced films released per year IDC achievements in the sector: Creating a critical mass to ensure continuity of the industry • Steering away from support for international productions only using South Africa for filming. • Focussing on production of local films telling South African stories to the world. • Funding for low-cost productions. • Developing the complete value chain. Creating an infant industry in animation • Funding for an animation studio to produce two full-length animation films. Source: National Film and Video Foundation

21. Tourism Number of International Inbound Tourists to South Africa IDC achievements in the sector: Developing of an eco-tourism and sports tourism industry • Establishment of several game lodges and funding to SANParks to take advantage of South Africa’s natural beauty. • Provided funding for the hosting of a mountain bike race, the development of a windsurfing resort and the construction of a velodrome. Building base capacity for the tourism industry • Funding for new hotels or expansions of existing hotels in preparation for the FIFA 2010 World Cup. Crowding in the private sector • When IDC start out funding the industry, commercial banks did not have an interest in funding the sector. Most banks now have teams dedicated to the sector. Source: World Bank, StatsSA, DoT • R7.1 billion in funding approved1 • Impacting on 13 000 jobs 1 2013 prices

22. Telecommunications IDC achievements in the sector: Reducing telecommunication costs • Approved funding for the first competition in the telecommunications industry in the country when the first two cellular operators were established. • Continued to fund the third cellular operator and a second fixed-line operator. • Assisted with the establishment of a national long-distance high-speed data network.

23. New technologies IDC achievements in the sector: Nurturing infant industries e.g. medical technology and bio-technology • Several start-ups that are commercialising uniquely South African technologies in these industries supported. Creating a South African venture capital industry • Initial funding to set up venture capital funds and later directly providing early-stage venture capital led the way for the establishment of the industry in South Africa. “VC activity remained fairly stagnant with the introduction of one or two new funds between 2000 and 2003. The most notable was the HBD Fund 1 linked to South Africa’s own internet billionaire Mark Shuttleworthas well as a number of funds backed by the IDC as part of a strategy to stimulate the local VC sector. These include Horizon Private Equity, Argil Venture Capital and Bioventures.” Southern African Venture Capital Association, 2010 SAVCA Venture Solutions VC Survey Value of IDC approvals: R627 million (2013 prices) Associated employment: 7 500

24. Looking ahead IDC will continue to support government’s industrial policy and development aspirations through on-the-ground implementation. IDC continues to explore new ways to lead industrial capacity development to ensure delivery on its mandate. In the immediate future IDC is seeking to ramp up its impact with the current resources at its disposal focusing on more effective deployment of its assets to develop industries and create jobs.

25. Thank You