Meeting report

ECONOMIC AFFAIRS SELECT COMMITTEE
14 November 2007
INDUSTRIAL DEVELOPMENT CORPORATION (IDC) ANNUAL REPORT 2006/07

Chairperson: Ms N Ntanambi (ANC; Western Cape)

Documents handed out:
Industrial Development Corporation (IDC) Annual Report 2006/07 [available at www.idc.co.za]
Industrial Development Corporation (IDC) presentation

Audio recording of meeting

SUMMARY
The Industrial Development Corporation gave an accounting of their Annual Report 2006/07. The IDC had undertaken a review of all its processes to determine which strategies would maximise efficiency. They noted improvements in development impact largely as a result of increased activity. The IDC’s financial performance exceeded budgets. They were on track to exceed their five-year job creation target. In the 2006/07 financial year it had allocated R597 million to businesses operating in or near townships.

 

The Committee concentrated on rural development and whether the IDC was ensuring that rural development took place. They also questioned if the IDC’s projects were aligned with local and provincial strategies to avoid duplication and maximise efforts.

 

MINUTES

Industrial Development Corporation briefing
Mr Geoffrey Qhena (Chief Executive Officer: IDC) explained their primary role as supporting sustainable development by means of assisting industries to develop and investing in businesses showing economic merit. In turn this achieves their objectives of sustainable job creation, regional development, supporting entrepreneurship and small medium enterprises.

IDC’s achievements for 2006/07 included:
• Facilitated the creation of a record of more than 33 000 direct jobs in South Africa with a further 3 900 in the rest of Africa as a result of funding activities;

• R5.9 billion in funding approvals for 241 enterprises;

• About 24% of the jobs to be created and 20% of approvals to three provinces with highest unemployment rates;

• 69% of the number of approvals relate to SMEs;

• 162 transactions totalling R3.4 billion to black empowered companies;

• More than 680 SMEs received training and business support;

• Earmarked R250 million in venture capital for the next five years;

• Facilitated six workers’ trusts and 15 community foundations in our investments;

• The IDC won Businessmap Foundation/Business Report award for Top Development Financier for Black Economic Empowerment for the fourth consecutive year, with one of their clients winning the Top Black Business award and another two clients reaching the finals.

 

Mr Qhena detailed achievements in terms of provincial involvement, their expanding regional role and regional development that saw R597 million approved for developments in townships. They expected this to create 5100 new jobs and save 1400 existing ones. The presentation looked at BEE and SME support and detailed some of their high impact projects. Specific examples were given of how IDC had touched lives.

 

The financial results showing IDC’s income statement and balance sheet were outlined.

Discussion

Ms M Madlala-Magubane (ANC; Gauteng) said that the presentation mentioned that businesses were not funded if there were perceived high risks. She wanted to know what the high risks were.

 

Mr Qhena replied that the IDC first did an evaluation of the risks associated with the organisation that required funding. These risks were assessed and then the IDC would make the decision whether or not to provide funding.

 

Ms Madlala-Magubane referred to IDC’s regional development and wanted to know what type of employment would be created.

 

Mr William Smith (Head of Operations) replied that there were regional operations. During high economic activity there was a huge dual flow into IDC, those business plans and proposals that were complete were dealt with quickly. The challenge was to get to know the regional areas that required assistance. It was crucial to find senior people with the required and relevant experience. Regional managers, based in each of the nine provinces and interacting with the local development agencies in the provinces, had come up with a strategy for each region. The Business Accord programme, that engaged the senior officers, had been created and offered the service where new entrepreneurs could come with their business ideas and plans and utilise the consultants that had been appointed throughout the country. It would then go through to Sandton where the operations side could be dealt with. The offices in Western Cape, Kwazulu-Natal and Eastern Cape were actually marketing office. They would become operationalised, once equipped with the right skills.

 

Ms Madlala-Magubane asked for clarity on the methods used to save jobs as stated in the presentation.

Mr Qhuena replied that, in reference to permanent jobs, it meant that employment went beyond specific projects, such as the building of a hotel or the financing of a film. These jobs ensured that employment was sustained and was not limited to the duration a project.

Ms Madlala-Magubane asked if there was a plan in place to address the gaps that IDC identified in some Small Medium Enterprises (SMEs).

Mr Abel Malinga (Head of Mining Strategic Business Unit) replied that there was an academy and an external examination for their course. They provided training to their customers and potential customers that required certain business skills. Where lack of skills was identified, attempts were made to mitigate them. Entrepreneurs were invited in each of the regions to specific courses dealing with putting together business plans and how to run a business. There had been courses held in the different regions such as Northern Cape, Free State, North West.

 

Mr W Douglas (ACDP) asked about the attrition rate for enterprises that had been IDC funded but had failed. Further, what justification was given for the failure of these enterprises despite the provision of IDC funding.

 

Mr Qhuena replied that the IDC was the last organisation to leave a company in trouble. They did have a unit that specialised in these situations. This unit looked at the causes for the failing business. The unit would also provide support as needed.

 

Mr Douglas asked what was being done to ensure that Broad-based Black Economic Empowerment (BEE) actually took place and that contracts were awarded not only to the same huge BEE consortiums.

 

Mr Qhena replied that they were aware of the fact that it was the same companies applying and often attaining the contracts. The IDC had access to capital funds. He agreed that communities should be involved and the access to these funds would assist in ensuring this. A percentage of the capital funds were used for a number of start-up companies.

 

Mr Douglas related his question to the fishing industry and mentioned the small harbour communities that were devastated by the lack of quotas and the lack of support by organisations such as IDC in turning their industry into viable profitable ventures for local communities. He referred to the problem with quotas and said that it seemed as if there was a movement towards land-locked Gauteng-based companies getting access to financing, whereas harbour communities were not.

Mr Ntloko replied that the IDC had started to participate in funding within the fishing industry. The biggest challenges were assisting with the small fishing industry, there was a development plan and it would be monitored as they had identified those that required such a plan.

 

Ms Ntwanambi commented that there was an improvement in the Western Cape. She referred to the nodal points in the country, especially in the Western Cape. She asked where they were and what was being done in order to create development in these areas.

Ms Madlala-Magubane asked if rural districts where jobs would be created had been identified and if so what rural districts were they.

 

Ms Ntwananmbi asked about IDC’s relations with provincial structures. She asked if there was a relationship in order to avoid duplication.

Mr Lizo Ntloko (Regional Manager: Western Cape) replied that the nodal districts such as Mitchell's Plain, Khayelitsha and Beaufort West had their strategies aligned with the local and provincial strategies. A meeting was planned with the Western Cape provincial government to discuss and align their rural development strategies, but the meeting had not taken place yet.

Ms Ntwanambi was concerned that executive management only had two women and felt that there should be a way to increase women representation in management.

 

Mr Qhena replied that progress had been made in employing women in management as the totals had risen over the past two years.

 

Ms Ntwanambi asked how IDC measured their work performance in terms of employment, in the various provinces. She was especially concerned with the fact that in the areas where IDC had funding yet no improvements had occurred.

Mr Qhena admitted that some of the provinces were not doing as much as they should be doing. There were programmes and they were monitored regularly.

Ms Madlala-Magubane asked what had been done to create employment in those areas where there were no jobs at all.

Mr Qhena replied that they had engaged the Department of Trade and Industry and worked together with projects. The IDC wanted to cover as wide an area as possible and hoped to continue to work with other institutions.

 

Mr D Mkono (ANC; Eastern Cape) commented that when the IDC had road shows they should contact the Select Committee so they could ensure that the relevant people from their constituency could attend. He asked if the IDC played any role in sports development and if so which codes did they support.

 

Mr Ntloko replied that they did sponsor some black players, however they do not do it on a large scale as it was not part of their mandate.

 

Ms Ntwanambi asked if they had a recovery plan for businesses.

 

Ms Sindiso Malaku (Public Relation Manager: IDC) responded that they did have a unit that specifically dealt with distressed clients. There was a specialist in recovery strategies and they were assessed to determine in which areas that required help. In some cases a cash injection was required.

 

Ms S Chen (ANC; Gauteng) asked how was rural development encouraged.

 

Mr Qhena replied that IDC assessed what would work in a specific province. There was continual assessment to ensure that the programmes were sustainable and suitable opportunities were continually searched for.

 

The Chairperson thanked the presenters and adjourned the meeting.