'More effective IDC increases loan approvals by 35%

Tuesday, April 24, 2012

Cape Town - The Industrial Development Corporation (IDC) has increased its turnaround time for approval of loans to businesses and has increased loans approvals by over 35%, the Minister of Economic Development Ebrahim Patel said in his Budget Vote speech today.

The IDC had grown its approvals in funding and in the last year had moved from R8.7 billion to R13.5bn, while improving its turnaround in time from application to release of finance - from 82 days to 50 days.

This follows the announcement last year by the IDC that it would aim to lend R102bn over the next five years and introduced a new low cost loan scheme at prime less three percent and had also focused on funding priority sectors identified in the New Growth Path.

Under criticism from the DA that the government had not created any jobs under the New Growth Path, Patel said over 500 000 jobs had been created, since it was implemented in October 2010, when employment rose from 12.9 million to its present 13.5 million.

However, he conceded that 500 000 was not nearly enough, under the New Growth Path, which hopes to produce five million jobs by 2020.

Turning to the IDC, Patel said the development finance institution is also reporting every quarter on key performance figures - having starting first with the number of jobs its funding was helping to create.

He said the IDC's funding for the last financial year helped create over 30 000 jobs and save a further 11 000 existing jobs.

He highlighted a few of the IDC's projects which had helped create or sustain many jobs, that included the funding of a company that uses discarded plastic bottles to produce polyester fibres.

This company created 110 jobs with a further 90 new jobs to be created by July with a new round of funding and with 5 000 jobs sustained in the informal sector for those that collect plastic bottles.

The IDC had also issued a Jobs Bond valued at R4bn taken up by the Unemployment Insurance Fund (UIF) - R2bn of which was allocated in 2010 and a further R2bn had been allocated this year for lending with a strong emphasis on job creation.

Discussions were also being held for the release of a R5bn Green Bond by the IDC which would be taken up by the Public Investment Corporation (PIC) with a 14-year tenure, in order to raise the resources necessary to invest in the green economy.

Added to this, the IDC had also committed R5bn in finance to green energy, while his department had helped to get a wind farm in Coega back on track.

While the Presidential Infrastructure Co-ordinating Commission had identified 11 major infrastructure projects on the continent and Patel said the IDC - with a R19bn portfolio in 20 other countries on the continent - would assist in financing projects on the continent.

On Monday, Patel said a number of discussions were also under way with Brics countries to tap into their respective markets to finance infrastructure projects in South Africa.

Patel said the $100m in funding available by the China Development Bank to the newly launched Small Enterprise Finance Agency (Sefa) would help boost funding for the agency.

Sefa was launched on Monday and is a result of a merger between Khula, the SA Micro Finance Apex Fund (Samaf) and the IDC's small business lending portfolio - would be a wholly-owned agency of the Industrial Development Corporation (IDC).

The agreement was made under the Beijing declaration signed between South Africa and China in 2010 that outlined several key areas for co-operation between the two countries.

The new agency will focus on lending loans of up to R3 million to small businesses.

He said R2bn would be available over the next three years to small businesses through Sefa - including a R921m available to the agency from the IDC's balance sheet.

Patel had also set up an advisory committee to advise him on the most cost-effective way to disburse small business funding in South Africa.

Currently, the IDC has pledged R921m over the next three years to Sefa, while the government has put in R535m.

The agency would save about R20m a year with office space and services no longer being duplicated.

Patel said a stronger public-interest competition regime is emerging and defended the government's stance on Walmart.

"The government can't take the easy road when doing so will damage employment and industry capacity," he said

Government couldn't take the easy way when anti-competitive actions would damage industrialisation and take away jobs," he said.