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How the IDC can stimulate SA agriculture …

How the IDC can stimulate SA agriculture …. Rian Coetzee Head: Food, Beverage & Agro Industries Agri Outlook Conference 30 September 2009. The positioning of a development finance institution. Crowding-in of commercial funders

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How the IDC can stimulate SA agriculture …

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  1. How the IDC can stimulate SA agriculture … Rian Coetzee Head: Food, Beverage & Agro Industries Agri Outlook Conference 30 September 2009

  2. The positioning of a development finance institution • Crowding-in of commercial funders • Address market failures - provide additionality and encourage investments which move the economy in the desired direction • Catalytic role - encouraging private sector investment • Leadership role – others follow if DFI is successful and proves a market (project developers) • Risk-takers – more equity-orientated with flexibility important • Key performance indicators - ability to identify, and successfully address, new gaps in the market, before its current market is taken over by other financial institutions

  3. IDC – a pure African development finance institution (DFI) … • Established in 1940, owned by the Government of South African & 100% self-financing • Provide risk capital to commercially viable businesses in various sectors • Objectives: • Supporting industrial development capacity • Promoting entrepreneurship • Mandated to invest in the whole of Africa (since 2000) • Strong capital base developed through years of sound investments • Differentiation: • Identification & funding of projects in partnerships with others • Promotion of & investment in viable new industries • through risk-taking and flexibility in structuring IDC Head Office, Sandton (also 8 regional offices)

  4. Sectoral focus areas Primary Agriculture Secondary Agriculture Food Field crops ** Beverage Horticulture Agro-industrial Livestock ** Fishing & aquaculture • * Rest of Africa focus on Secondary or backward integrated projects • ** Exceptions • integrated projects • Special government initiatives

  5. Role in agriculture … • Support labour intensive sectors • Conversion to higher value crops • Linkage – larger commercial farmers & smallholder farmers • Scale economies for smallholder farmers • New/niche sectors (innovation) • Market access • Agro-processing • SADC value chain development

  6. The IDC’s Response Strategic Pillar 1: Strategic Pillar 2: Strategic Pillar 3: Strategic Pillar 4: Supporting Creating increased Food security Responsible & increased competition in food through co - innovative biofuels agricultural processing ordinated SADC support supply/production production in crop farming Strategies Strategies Strategies Strategies Emerging Farmers SME grain & oil seed Identify pockets of Food sensitive milling food vulnerability biofuels projects + + + + Sizable intervention in Optimal allocation of Explore 2 nd Co - operatives deep rural 2 nd production in SADC generation economy technologies + environments + Project facilitation & funding Restituted farms Food price crisis

  7. Financial crisis • Counter-cyclical role in the economy • No bailouts – economic merit non-negotiable • Opportunity - Sector efficiency and promote competitiveness • Working through broader sectoral stakeholders in affected industries to ensure co-ordinated remedies • Stimulate private sector lending with other financiers and stimulate the flow of credit, thus helping to improve market liquidity • Restructuring of existing facilities

  8. IDC Agri-business portfolio Sugar milling Bio-ethanol Nuts Fruit - Grapes Fruit - Apples Fruit - Citrus Processing - Meat Tea Wholesale Fruit - Berries Fibre Fruit - Subtropical Flowers Processing - Snacks • Total exposure & commitment = ZAR3bn • 20% (of value) outside South Africa • 80% (of value) in equity investments Processing - Fish Starch Fruit - Persimmon Beverages Processing - food Biotech Acquaculture Fruit - Cherry Meat processing Vegetables Oils Other ZAR 100.000.000 200.000.000 300.000.000 400.000.000 500.000.000 600.000.000

  9. Wholesale partnerships “Hub” partnerships Strategic partner Agribusiness Small farmers 170 emerging cash crop farmers in North West & Free State 16 citrus farmers in Alice/Kat River area, Eastern Cape Small farmer development

  10. Worker empowerment - Keboes Fruit farms Description – 500ha table grape development in Northern Cape, producing 1,91 million cartons of table grapes p/a IDC investment – R60m equity & quasi-equity IDC role – share warehousing for BEE group & workers Development outcomes – 1,000 jobs, worker empowerment; rural development BMFI Broad-based black economic empowerment Community empowerment - Amajuba Berries Description - 60ha raspberry farm in Volksrust, KZN IDC investment – R14m equity; R11m debt IDC role – project identification & facilitation; equity investment; partner identification; business support Development outcomes – 440 jobs; community ownership; new industry; R30m/a exports; rural development

  11. Kenaf - Sustainable Fiber Solutions Description – Plant based in Winterton, KZN, involved in the de-corticating of kenaf stalk and produces base fiber, core and fines used in the manufacture of bio-composites in the for automotive use – now also used for construction material & oil spillage IDC investment – R85m in equity IDC role – feasibility funding (trials); Development outcomes – new industry; massive job creation through the agricultural development; rural development Pro-active project development Biofuels - Arengo Description – The production of 90 million liters of fuel grade bio-ethanol p/a from sugar beet in the Eastern Cape. IDC investment – R414m equity & debt IDC role – pre-feasibility & feasibility funding; sponsor role; equity & debt underwriting Development outcomes – new sector; small scale farmer development; empowerment; rural development

  12. Casquip Starch, Swaziland Description – Cultivates cassava and produces starch in Swaziland IDC investment – R37m in quasi-equity IDC role – co-investment & partner selection Development outcomes – 1,500 jobs; rural development; SADC import replacement Foreign direct investment in the rest of Africa Matanuska, Mozambique Description – 3,000ha of banana plantation, Nampula, Mozambique IDC investment – USD10m quasi equity; USD10m debt IDC role – co-investment & partner selection Development outcomes – 5,000 jobs; infrastructure development; rural development

  13. Egypt Jatropha Biodiesel Niger Abattoir Mali Sugar Ghana Sugar Industrial Complex Kibos Sugar & Allied Industries = R95.7m Tanzania Sugar project Eastern Produce Malawi= R143m Government of Malawi= R2m Mozambique Banana Compania De Sena = R99m Komsberg Farming = R12m Zimbabwe processed vegetables Swaziland Cassava Starch Africa (excl. South Africa) Africa, excl. RSA - 19% of total exposure

  14. Day Month Year The Industrial Development Corporation 19 Fredman Drive, Sandown PO Box 784055, Sandton, 2146 South Africa Telephone (011) 269 3000 Facsimile (011) 269 2116 E-mail callcentre@idc.co.za

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