Implementation of the Industrial Policy Action Plan: IDC briefing

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Trade and Industry

11 May 2010
Chairperson: Ms J Fubbs (ANC)
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Meeting Summary

The Industrial Development Corporation (IDC) said the success of Industrial Policy Action Plan (IPAP) relied on all role players having a sense of urgency and co-ordinating and aligning their actions, and in the case of the different state departments, their procurement policies too.

Their recent funding approvals supporting IPAP sectors included solar electric generation, bio-ethanol fuel, aquaculture, metals and machinery and advanced materials. In addition to funding, they assisted in sourcing development funding, research and development and capacitating Development Finance Institutions (DFI’s), risk management and corporate governance. They also managed funds on behalf of government and supported SME’s. A private placing of R2 billion with UIF was envisaged to assist companies creating new jobs or saving existing jobs.

IDC’s balance sheet looked good. It was under geared but there was a need to relook at the recapitalisation of the company as it sought to advance R100 billion in the next five years. Later on in the year they would produce a report on this.

Members questioned the conglomerate nature of the IDC, that it was a commercial not a development bank and why it had been transferred from the Department to the Economic Development Department (EDD). They asked what the cost of refinancing the company would be. They enquired whether maize would be a bio-fuel feedstock. They asked about the organisation’s relationship with the departments of Agriculture, Forestry and Fisheries and Rural Development and Land Reform. They wanted a full report on the impact of the R1 billion the IDC had invested in the clothing and textile industry. They enquired about the role of the government in the recapitalisation of the company. They wanted to know why gold and diamonds, as major exports, were not referred to in beneficiation projects. They asked if there was any link between the IDC and co-operative and whether they were curbing import fronting. They wanted a detailed report on the cost of capital funded from the market.

The Committee deliberated on the draft Trade Policy document. A discussion on SACU (South African Customs Union) centred on the need to review the terms of this agreement. Members discussed the historical background to the formation of SACU; its current efficacy, and its future within regional co-operation agreements like SADC.

It acknowledged that pulling the rug on the agreement would have a disastrous effect on its other member states that relied heavily on the customs income, but that transgressions of the agreement by member states with states undermined South Africa’s industrial policy and could not be allowed to go unchecked. South Africa also carried most of the administrative burden.

Meeting report

The Industrial Development Corporation (IDC) said the success of Industrial Policy Action Plan (IPAP) relied on all role players having a sense of urgency and co-ordinating and aligning their actions, and in the case of the different state departments, their procurement policies too.

Their recent funding approvals supporting IPAP sectors included solar electric generation, bio-ethanol fuel, aquaculture, metals and machinery and advanced materials. In addition to funding, they assisted in sourcing development funding, research and development and capacitating Development Finance Institutions (DFI’s), risk management and corporate governance. They also managed funds on behalf of government and supported SME’s. A private placing of R2 billion with UIF was envisaged to assist companies creating new jobs or saving existing jobs.

IDC’s balance sheet looked good. It was under geared but there was a need to relook at the recapitalisation of the company as it sought to advance R100 billion in the next five years. Later on in the year they would produce a report on this.

Members questioned the conglomerate nature of the IDC, that it was a commercial not a development bank and why it had been transferred from the Department to the Economic Development Department (EDD). They asked what the cost of refinancing the company would be. They enquired whether maize would be a bio-fuel feedstock. They asked about the organisation’s relationship with the departments of Agriculture, Forestry and Fisheries and Rural Development and Land Reform. They wanted a full report on the impact of the R1 billion the IDC had invested in the clothing and textile industry. They enquired about the role of the government in the recapitalisation of the company. They wanted to know why gold and diamonds, as major exports, were not referred to in beneficiation projects. They asked if there was any link between the IDC and co-operative and whether they were curbing import fronting. They wanted a detailed report on the cost of capital funded from the market.

The Committee deliberated on the draft Trade Policy document. A discussion on SACU (South African Customs Union) centred on the need to review the terms of this agreement. Members discussed the historical background to the formation of SACU; its current efficacy, and its future within regional co-operation agreements like SADC.

It acknowledged that pulling the rug on the agreement would have a disastrous effect on its other member states that relied heavily on the customs income, but that transgressions of the agreement by member states with states undermined South Africa’s industrial policy and could not be allowed to go unchecked. South Africa also carried most of the administrative burden.

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