1. The IDC:
Financing For Development
UNIDO Rhythm/Working Group Meeting Presentation
Moroasereme Ntsoane
SBU Head
011 269 3174 (tel) / moroaseremen@idc.co.za
2. Contents
• IDC Corporate Profile
• Development Finance Approach
• Performance of automotive industries
• IDC Assistance
3. Introducing the IDC
• Established in 1940, the IDC is a self -financing,
State-owned development finance institution
• The vision of the IDC is to be the primary
source of commercially sustainable industrial
development and innovation to the benefit of
South Africa and the rest of the African
continent
• Provides financing to entrepreneurs engaged
in competitive industries and enterprises based
on sound business principles
• Pays income tax at corporate rates and
dividends to the shareholder
• Aims to maximise developmental and financial
returns within an acceptable risk profile
4. Introducing the IDC (cont.)
Vision
To be “the primary driving force of commercially sustainable industrial development and innovation to the
benefit of South Africa and the rest of the African continent”
The IDC is a self-financing national development finance institution whose primary objectives are to
Mission
contribute to the generation of balanced, sustainable economic growth in Africa and to the economic
empowerment of the South African population, thereby promoting the economic prosperity of all citizens.
The IDC achieves this by promoting entrepreneurship through the building of competitive industries and
enterprises based on sound business principles.
Objectives
Supporting industrial development capacity
Promoting entrepreneurship
Sustainable employment Growing sectoral diversity
Regional equity Growing SME sector
Outcomes
Industrialisation in the rest of Africa Broad-based black economic empowerment
Environmentally sustainable growth New entrepreneurs entering the economy
5. Introducing the IDC: industry development
Food, Mining and Forestry, Wood, Clothing,
Chemicals and Fabricated Construction
Beverages and Beneficiation Paper Textiles Leather
Allied Metals,
Agriculture and Footwear Machinery and
Transport Portfolio:
Portfolio1: Portfolio: Equipment USD 123 mil
Portfolio: Portfolio:
Portfolio:
USD 344 mil USD 2 675 mil USD 344 mil USD 147 mil
USD 1 374 mil Portfolio:
USD 209 mil
1 Exposure as at 31 March 2009 at market values, including commitments, excluding listed investments not managed in SBUs
5
6. Introducing the IDC: industry development (cont.)
Public, Private Transport, Media and Techno- Venture Healthcare
Tourism Franchising
Partnerships Financial and Motion Industries Capital and
and Other Services Pictures Education
Infrastructure Portfolio: Portfolio:
Portfolio: Portfolio:
Portfolio: USD 405 mil USD 123 mil Portfolio: Portfolio:
USD 233 mil USD 74 mil
Portfolio: USD 380 mil USD 135 mil USD 430 mil
USD 736 mil
6
7. Actively supporting business/industries in Africa
The South African Government is committed to support economic
development in South Africa and in the rest of Africa. As such, IDC‟s core
strategies for the continent aim to:
Leverage private sector investment for economic development
throughout the continent;
Play a major role in the development of industrial capacity and
promoting entrepreneurial activity;
Strengthen South Africa‟s constructive role in regional economic
development;
Leverage foreign direct investment by bringing in foreign partners using
international networks;
Promote supply of goods & services from SA;
Establish credit lines for financially sustainable regionally-oriented
financial intermediaries;
Support NEPAD and regional spatial development initiatives (SDIs).
8. Financial instruments
• IDC offers a wide array of financial
instruments, including :
– Equity
– Quasi-equity
– Commercial debt
– Wholesale finance
– Venture capital
– Guarantees
– Export and import finance
– Credit lines to DFIs
• These may be provided singly or in
combination
Flexible deal structuring
9. Financing criteria
• Greenfield projects, expansions & rehabilitations
• Minimum financing in South Africa R1 million
(USD125 000) and relatively sizeable projects
elsewhere in Africa.
• Profitability & sustainability within a reasonable time
frame
• Developmental impact (jobs, value addition, exports)
• Fixed assets and the fixed portion of growth in
working capital requirements
• Reasonable financial contribution from owners
• Security
• Environmental standards
10. Role in project development
• Co-sponsor feasibility studies
• Identify project opportunities
• Provide and arrange funding (e.g. export and import
finance, equity and loan funding)
• Identify suitable international and local DFIs, commercial
and merchant banks and companies and export credit
agencies as potential participants
• Financial adviser in partnership with other financial
institutions
• Share project risk with the sponsors and financial partners
• Identify strong operating partners
• Off-take and supply agreements
11. Role in project development (cont.)
• Assist with the early negotiations of project
agreements to improve and ensure their bankability
and shorten the funding schedule
• Structure appropriate limited recourse funding
packages by allocating project risk to the appropriate
stakeholders
• Assist with implementation via steering committee
• Serve on board of directors
• IDC does not seek shareholding control or
management participation
12. Examples of early-stage project development
Some of the projects under investigation include:
– Solar power generation: A renewable energy project, serving as a pilot
project and potential more roll-outs in future.
– Natural fibres: Development of a sisal plantation to the benefit of local
communities.
– Electric vehicle batteries: Investigating the viability of establishing a large
cell lithium-ion electric vehicle battery manufacturing facility in South Africa
– Wind power generation: A wind farm project to produce 500 MW of power.
– Bio-ethanol: Various bio-ethanol projects around the country.
– Kenaf: Project to investigate the utilisation of Kenaf (a natural fibre) in the
construction industry.
– Electricity generation: Integrated coal mine and power project in Botswana.
– Petrochemicals: Construction of a synfuels plant and associated
infrastructure.
– Platinum smelter and refinery: Early feasibility stage for establishing a PGM
smelter and refinery.
12
13. Assisting our business partners during the
economic crisis
The economic crisis is impacting businesses on various levels Consumer
Unable to confidence lower,
source finance Lower demand
spending less
from traditional for products and
sources services
Financial
institutions Firm Business
tightening credit confidence lower,
criteria, extending cutting costs and
less credit investing less
Internal cash
flow pressures
Creditors and Lower levels of
debtors under Excess stock foreign demand
financial pressure build-up
The IDC is assisting in filling the gap in the market left by financial institutions extending less credit to businesses
and in so doing ensuring that jobs and capacity of viable businesses are being retained.
The IDC is budgeting R11.4 billion of funding for approvals in the current financial year, R2.9 billion specifically to
assist distressed businesses.
14. Financing of infrastructure projects
• The IDC‟s Public-Private Partnerships Strategic Business Unit (PPP
SBU) provides debt and/or equity funding for key infrastructure projects
in sectors such as:
– Power
– Water
– Telecommunications
– Information technology
– Transportation
• Some of the major projects currently in the portfolio include:
– Gautrain project (funding for Bombela consortium)
– Neotel (second network operator)
– Internet based control and communications equipment at all
entrance points in D.R. Congo
– Pebble Bed Modular Reactor (PBMR)
15. IDC‟s pipeline of infrastructure projects
Some of the major projects in Africa currently in the portfolio include:
Mozambique:
• Cahora Bassa hydro-electric power project
Tanzania:
• Ruhudji hydro-electric power project
• Mchuchuma coal project
Democratic Republic of Congo:
• Inga 2 hydro-electric power project
• Africa Union Financial Services (“AUFS”)
Uganda:
• Aswa Forest and Power Station
• Kalangala infrastructure (transport, telecoms, power)
Various countries:
• Telecom submarine cable system
• Satelite system for HDTV and telecom backhaul
• Zim/Zam/Nam/Bots/SA transmission network. Cahora Bassa Dam: Mozambique
16. New/emerging industries being financed by the IDC
In the 2000s and in the future:
• Berries
• Cherries
• Persimmon
• Community pay-phones
• Motion pictures
• Diamond cutting & polishing
• Bio-fuels
• Composites
• Biomass
• New technologies
• Owner-driver schemes
• Boat-building
• Tele-medicine etc..
IDC also envisages a major role in funding:
• Suppliers to state owned enterprises
• Infrastructure/PPPs
• Energy, including renewable
• Resource beneficiation
• New industry development
• Expansionary black economic empowerment
• Implementation of NIPF and IPAP
17. Some of IDC‟s current projects in South Africa
Co-financing early stage project development
• Rail transport infrastructure
• Electro-activated water
• X-ray machines • Rail transport
• Cellular communications
• Probiotictechnology • Energy from coal
• Cut roses • Coking coal briquettes
• Pectin
• Barley and groundnuts • Biodiesel ?? • Ethanol
• Chrome chemicals • Proxide production • Lime mine and kiln
• Cut flowers • Peroxide production
Silicon metal ?? • Macadamia nuts
• Ferrochrome • Apple farming • Platinum
• Alluvial diamonds • Walnuts
• Cotton ginning • Cherries
• Mandarines • Diamonds?? • Biomass pellets
• Strawberries • Soya oil
• Coal mining
• Stainless steel
• Forestry &
sawmilling
• Citrus
• Renewable energy
• Beta-carotene production
• Abalone production • IDZ infrastructure
• Lusernprotein production • Sugar production
• Goat farming • Orchid production
• Citrus • Cassava production
• Abalone spat • Ethanol
• Fruit & nuts (grapes & dates, • Biofuels
pistachios) • Ceramic tile production
• Cotton ginning • Power station
• Citrus production
• Toll roads • Ferrochrome
• Aquaculture • Biological pest control
• Fruit (figs & prickly pear, • Alcohol production
• Vaccine production pomegranate) • Coal mining
• Hoodiaprocessing • Leather tannery • Aluminium beneficiation
• Vaccine power generation
Nuclear production • Sugar beet
• Forestry
• Satellite launch technology • Aluminium smelter
• Berries farming
• Canola oil extraction • Berries farming Legend
• Non-woven textiles
• Fruit juice production • High pressure aluminium • Kenafcultivations & fibre production
castings Pre-feasibility
• Cold rolled steel • Rasberries
Raspberries
• Bio-reactor • Biomass– fuel pellets Feasibility
• Fish processing • Wood processing Pre-implementation
• Fruit & citrus (Blue berries, • Citrus farming
• Fruit production Implementation
persimmon, grapes)
19. The IDC: Corporate profile
• Established in 1940, the IDC is a self -financing,
State-owned development finance institution
• The vision of the IDC is to be the primary source of
commercially sustainable industrial development and
innovation to the benefit of South Africa and the rest
of the African continent
• Provides financing to entrepreneurs engaged in
competitive industries and enterprises based on
sound business principles
• Pays income tax at corporate rates and dividends to
the shareholder
• Aims to maximise developmental and financial
returns within an acceptable risk profile
The IDC‟s Head Office in Sandton (Johannesburg)
20. The IDC‟s vision, mission, objectives & outcomes
Vision
To be “the primary driving force of commercially sustainable industrial development and innovation to the
benefit of South Africa and the rest of the African continent”
The IDC is a self-financing national development finance institution whose primary objectives are to
contribute to the generation of balanced, sustainable economic growth in Africa and to the economic
Mission
empowerment of the South African population, thereby promoting the economic prosperity of all citizens.
The IDC achieves this by promoting entrepreneurship through the building of competitive industries and
enterprises based on sound business principles.
Objectives
Supporting industrial development capacity
Promoting entrepreneurship
Sustainable employment Growing sectoral diversity
Regional equity Growing the SME sector
Outcomes
Industrialisation in the rest of Africa Broad-based black economic empowerment
Environmentally sustainable growth New entrepreneurs entering the economy
21. Achieving developmental objectives
Financial year 2008/09:
• Funding approvals amounted to R10.8 billion, up 27% on the
previous year
• Largest portion of funding (52%) for start-ups and
expansions in South Africa
• 39% increase in the number of approvals to 231
• 69% of the total number of funding approvals to SMEs
• Increased funding approvals to the rest of the African
continent by 38% to R2.9 billion
• The funding activities will facilitate in the creation of:
– more than 24 200 direct new jobs in SA
– around 5 000 in the rest of Africa
• Funding of R500 million approved for distressed companies
– 2 500 jobs expected to be saved
22. Industrial development approach
• IDC addresses market failures / gaps by supporting investments, which
may otherwise not happen, in partnership with private sector companies
• IDC investments are for development purposes, with the ideal investment
being one that generates developmental as well as financial returns
• This entails taking a higher risk profile than commercial financiers in
order to support the development of sectors and new entrepreneurs
through …
Diversifying the economy through supporting a range of sectors
Encouraging the introduction and development of new industries and
products
Developing internationally competitive companies
Supporting the establishment of greenfield developments
Supporting expansions of existing businesses
Facilitating the entry of new entrepreneurs and supporting their development
Supporting the growth and development of small and medium businesses into
competitive players
Encouraging regional development by supporting companies with regional
comparative advantages
23. Sectoral involvement
Agriculture and Agro-processing
Mining and Beneficiation
Manufacturing
• Metals
• Chemicals
• Textiles
Services
• tourism
• IT and telecoms
• media and motion pictures
• healthcare & education
• Transport, storage and financial services
• venture capital
• franchising
• Construction and 2010
Infrastructure
24. Financial instruments
• IDC offers a wide array of financial instruments to
entrepreneurs, including :
– Equity
– Quasi-equity
– Commercial debt
– Wholesale & bridging finance
– Share warehousing
– Export/import finance
– Short-term trade finance
– Venture capital
• These may be provided singly or in combination
Flexible deal structuring
25. Financing criteria
• Financial assistance is provided for the development of
new businesses, expansions or rehabilitation of existing
businesses
• Business case must exhibit economic merit (i.e. it must
be profitable)
• Reasonable contribution expected from promoter/s
• Minimum of R1 million
• Security
• Environmental compliance
26. Non-financial forms of business support
• Training of entrepreneurs
• Business support to entrepreneurs: IDC Business Support
Programme was established to assist where appropriate:
– potential clients in preparing a business plan; and
– existing clients where e.g. shortcomings in the
management capacity has been identified, if a
short-term intervention is required, if it experiences
financial difficulties.
– The funding for the business support is borne
partly by IDC
• Support for community groups
• Encouraging investments to address certain goals through
incentives
27. Funding broad-based BEE
• IDC, as a major South African DFI, remains fundamental to the
national agenda to realise BBBEE objectives
• IDC has developed critical skills and experience in financing BBBEE
• To augment these BBBEE objectives and remain a significant player
in BBBEE funding, job creation and BBBEE remain the overarching
factors in all our funding activities:
facilitate ownership of businesses
ensure transfer of skills to enhance management capacity
and entrepreneurship
advancement of HDSA employees (share and/or profit
participation)
employment equity
procurement policies
women advancement in business
28. Approach to provincial & local development
• Unlocking investment potential to address inequitable
regional socio-economic development
• Exploiting comparative advantage in sectors Development agencies
• Addressing market gaps Approved agencies
Applications received
and assessed
• IDC in discussion with provincial development
corporations to address capacity building
• Capacity building for third-tier government through
development agencies (24 approved to date), primarily
in rural areas
• Expanding IDC‟s reach through offices in all provinces
29. Recent developments in the global & local automotive industries
• Worldwide automotive industry was caught in the eye of the global financial storm
• Governments in the US and Europe have intervened to help prop-up the industry
• In addition, a variety of incentives have been introduced to boost sales across the world
• The local market has seen a steep fall in motor vehicles sales since record sales of 2007
• A number of components and accessories manufacturers have closed down
• The number of dealerships has also reduced
• Job losses have continued unabated since late 2008
• In recent months, exports have slowed down considerably
• In the first half of 2009 vehicle sales slumped by one-third relative to same period in 2008
• Exports have fallen rapidly, with June figures showing a 52.5% decline on the same period last year
30. South African economy:
Most distressed major sectors within manufacturing
Volumes of Production Spare capacity changes Business confidence
Average monthly % change
Manufacturing sector (y-o-y) over 6-month period % change % point increase in Index point decline
Current spare
ending: from most spare capacity since since most recent
capacity levels
recent high Q3 „08 high
Mar-08 Oct-08 Mar-09
Motor vehicles, parts and accessories
0.4 -0.7 -35.3 -49.2 29.2% 13 77
and other transport equipment
47.5% (iron & steel) 94 (fabricated metals)
Basic iron and steel, non-ferrous metal 29.3 (iron & steel)
-0.5 -3.7 -23.5 -27.5 24.4% (metal 77(basic metals)
products, metal products and machinery 5.8 (metal products
products) 77 (machinery)
9.6(other
Furniture and other manufacturing 15.3% (other
9.3 6.0 -14.9 -29.1 manufacturing) 77 (furniture)
division manufacturing)
23.4% (textiles) 4.2 (textiles) 59 (textiles)
Textiles, clothing, leather and footwear 6.5 -2.5 -11.7 -23.8
29.6% (leather) 7.4 (leather) 48 (clothing)
Glass and non-metallic mineral products 3.2 -2.0 -10.9 -20.5 19.8% (non metallic) 6.2 (non metallic) 86 (non-metallic)
Petroleum, chemical products, rubber 17.5% (basic 72 (plastics)
7.6 9.8 -7.2 -15.4 4.4 (basic chemicals)
and plastic products chemicals) 64 (chemicals)
Wood and wood products, paper, 17.3% (wood & 4.2 (wood & wood 100 (wood)
0.0 2.4 -7.0 -17.3
publishing and printing wood products) products) 82 (printing); 50 (paper)
Radio, television and communication
2.9 3.0 -5.2 -17.1 N/A N/A N/A
apparatus and professional equipment
Food and beverages 3.0 4.0 2.7 -6.8 N/A N/A 81 (beverages); 78 (food)
Electrical machinery 11.3 11.6 4.7 -8.6 19.5% 1.2 83
Total manufacturing 3.3 2.3 -13.2 -21.6 21.4% 6.5 67
Source: IDC analysis
31. South African economy:
Manufacturing sub-sectors reporting sharpest fall in production volumes
Sectors most impacted upon experienced a steep fall in production activity
Most distressed sectors in manufacturing
(6 month to March '09 average y-o-y % change )
Basic iron and steel
Parts and accessories
Motor vehicles
Insulated wire and cables
Leather and leather
General purpose machinery
Bodies for motor vehicles
Other textile
Sawmilling and planning of wood
Other manufacturing
Structural metal
Non-metallic mineral
Basic chemicals
Special purpose machinery
Publishing
-50 -45 -40 -35 -30 -25 -20 -15 -10 -5 0
Source: StatsSA %
32. South African economy:
Manufacturing - IPAP sector performance
2007 2008
Manufacturing output growth by sub-sector in 2007 Manufacturing output growth by sub-sector in 2008
Total Manufacturing Total Manufacturing
Textiles Textiles
Clothing Clothing
Basic chemicals Basic chemicals
Other chemicals Other chemicals
Plastic products Plastic products
Paper products Paper products
Furniture Furniture
Metal products Metal products
Machinery Machinery
Transport equip. Transport equip.
Automotives & parts Automotives & parts
-2 0 2 4 6 8 10 12 14 16 -10 -5 0 5 10 15 20 25
Source: Stats SA % Change Source: Stats SA % Change
33. South African economy:
New vehicle sales plunging in 2009, but expected to recover
New Vehicle Sales and Domestic Production
700
Domestic Production Forecast
600 Domestic sales of local production
CBU Imports
Exports
500
Units ('000)
400
300
200
100
0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Source: Naamsa
34. South African economy:
New passenger car sales worst affected in 2009
Growth in new vehicles sales
40%
Forecast
30%
Passenger
Light Commercial
Medium and Heavy Commecial
20%
10%
0%
-10%
-20%
-30%
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Source: Naamsa
35. South African economy:
Imports sharply down, but expected to rise again in 2010
Passenger and light commercial vehicle imports
350
Forecast
300
Total imports
Passenger vehicle
Light commercial vehicle
250
Units ('000)
200
150
100
50
0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Source: Naamsa
36. Automotive Industry Executives‟ Perceptions of
Future Changes in Market Share (KPMG / 2009)
100%
7 6
10 11 10
14 14 15 17
90%
12 16 28 30 32 30
36
80% 22 22
28
26
70%
63
43 69
45 73
60%
51
Decrease
39 37
50% Remain the same
Increase
48 53
44
40% 81
78
68 67
30% 62 60
24
43 12 21
20% 40
33 33 32
10% 20 20
17 15 13
10
0%
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37. Assisting companies in distress
• R6.1 billion set aside to assist distressed companies over the next two years
• Approach to funding companies in distress:
– To ensure long term sustainability of enterprises: interventions will be on a firm by firm basis.
– Focus will be on companies that are experiencing difficulties/distress due to cyclical downturn
– Business must prove historical viability, and demonstrate structural improvements that will
enhance long term competitiveness.
– Businesses being assisted should demonstrate that the business case re-emerges within a
reasonable timeframe, once global/domestic conditions improve.
– Interventions should be to the benefit of the company being assisted and not relieve existing
shareholders or other financiers from their obligations.
38. Assisting companies in distress (continued)
– Developmental returns should be measured and monitored
– Distress Funds recipients should seek to save jobs, without sacrificing viability, and proper
consultative procedures must be observed where job losses are unavoidable.
– Risk sharing must be demonstrated between all stakeholders (viz. shareholders, creditors,
debtors, employees and management) – enable the IDC to leverage its balance sheet further
39. Funding within SOE Capex (2008/2009 Financial
Year)
• Ca R81.2 million approved to four Transnet suppliers of locomotives, coaches, seats
and other products
• Ca R71.6 million approved to three Eskom suppliers of electric motors, generators,
transformers and ventilation systems
• A few others have been rejected due to lack of confirmed offtakes from SOE’s
40. IDC involvement in Africa (excl.SA): projects under consideration
SENEGAL EGYPT
• Transport • Agriculture
• Bio-diesel
GUINEA SUDAN
(Conakry) • Water supply
• Mining NIGER UGANDA
• Meat • Infrastructure
KENYA
processing •Energy
LIBERIA • Infrastructure
•Mining
• Mining • Energy
• Agro-processing
GHANA
• Energy MALAWI
• Agro-processing •Mining
•Food processing
CONGO (Brazzaville) RWANDA
• Mining • Energy TANZANIA
• Infrastructure •Energy
•Agro -processing
D.R. CONGO
•Telecoms MAURITIUS
•Energy NAMIBIA •Telecoms
•Mining •Mining •Financial services
ZAMBIA MADAGASCAR
•Mining BOTSWANA • Mining
•Energy • Energy
•Rail MOZAMBIQUE
ZIMBABWE •Refinery
•Sawmilling LESOTHO •Forestry
•Energy •Agro-processing •Energy
•Infrastructure •Agro-processing
41. South African economy:
Mixed performance at a sub-sector level
• Supply-side of the economy (agriculture,
mining and manufacturing) has been hardest
hit by the unfolding crisis as not only
domestic demand came under pressure, but
also due to a sharp drop in export demand.
• The manufacturing sector suffered severely
as key sectors such as base metals (e.g. iron
& steel, fabricated metal products and
machinery & equipment) and the transport
equipment sector (incl. motor vehicles &
parts) contracted sharply.
• The construction sector still managed to
report a sterling performance considering the
circumstances as this sector benefitted from
the substantial public sector capex
programme.
• Sharply weaker consumer spending took its
toll on the trade sector, particularly on the
motor trade and retail trade segment.
• However, a recovery is visible in certain
segments of the economy, with month-on-
month production increases being reported in
the mining and manufacturing sector in recent
months.
43. Sectoral growth
• Solid growth performance of the
SA economy continued throughout
2007.
• Construction sector reported the
strongest growth, underpinned by
increased building construction
activity and high levels of fixed
investment across most economic
sectors.
• The strong consumer boom was
reflected in high growth rates in
the trade and financial service
sectors.
• The brisk growth in the
manufacturing sector was mainly
due to strong domestic demand as
exporters faced a challenging
global trading environment.
• Mining activity has been adversely
affected by a continued decline in
gold production, although partially
offset by the excellent
performance of the platinum sub-
sector.
44. Recent developments in the global & local automotive industries
• Worldwide automotive industry was caught in the eye of the global financial storm
• Governments in the US and Europe intervened to help prop up the industry
• In addition, a variety of incentives have been introduced to boost sales across the world
• The local market has seen a steep fall in motor vehicles sales since record sales of 2007
• A number of components and accessories manufacturers have closed down
• The number of dealerships has also reduced markedly
• Job losses have continued unabated since late 2008 and is expected to stabilise
• In 2009 motor vehicle sales slumped by 30% relative to 2008
• Exports also declined 38.4 per cent to 174 947 in 2009
• Similarly passenger car imports declined by 20.7 per cent during the same period
• BMW and VW recently announced R2.2 billion and R3.5 billion investment plan respectively, which
should help boost demand for inputs also assisting suppliers to survive the current tough
environment
45. Vehicle sales, exports and production
• Very buoyant domestic market in the mid
2000s
• Exports have been the hallmark of the
industry‟s performance over the last
decade and a half
• Poor performance over the last two years
• Steep decline in 2009 but recovery is also
forecast
• Expected recovery over the next two years
• Domestic production has been partially
underpinned by exports
• Growth local in demand was to an extent
satisfied by imports
• Domestic production in 2009 stood at 373
923 units, the lowest since 2001
46. Automotive industry remains under pressure
• Vehicle sales still under pressure but off • Exports have fallen sharply as global
worst levels as consumers take strain conditions deteriorated. Consumer
from a high debt burden, tighter credit demand under stress globally.
conditions, declining disposable income
and increased job losses.
47. Employment in Automotive Components and parts industry
• Employment in the components and parts
segment declined markedly since the
2008 peak
• Contract employees bore the brunt of the
decline in demand
• A number of established components
manufacturers closed down leaving
thousands out of work
• NAACAM reported that between
September 2008 and Q1 2009 some 17 000
jobs were lost in the components industry
• Metair alone fired 3 500 employees since
the onset of the crisis
48. Concluding remarks
• South Africa and the rest of the African continent present
a myriad of business opportunities across numerous
sectors of economic activity.
• Investment activity expected to experience a slowdown
in 2009, largely due to the ramifications of the global
crisis, but outlook remains positive as recovery gathers
momentum
• FIFA World Cup in 2010 should provide a significant
stimulus.
• Certain challenges remain, but the South African
Government is strongly committed towards a continued
improvement in the investment environment going
forward.
• The IDC, as the state-owned development financier
focused on the expansion of the industrial capacity of
South Africa and the rest of the African continent, would
like to be your development finance partner !
49. Vision and Mission
Vision
To lead in the development of the complete manufacturing downstream value-chain of
the ferrous and non-ferrous metals
Mission
To develop and support viable downstream developments and value-adding to ferrous
and non-ferrous metals to improve competitiveness and increase the capacity of the
metals industry in South Africa and the rest of Africa by working pro-actively, cost-
effectively and taking a more risk –tolerant approach.
50. SBU Focus – IPAP2 Lead Sectors
• Automotive Sector
• Fabricated Metals, Capital and Transport Equipment Sector
• Renewable Energy Components Sector
• Advanced Manufacturing Sector
51. Automotive Sector
Doubling of local content in components
• Finance new 1-tier component manufacturers in South Africa
• Secure investment by Asian OEM
• Finance capacity expansion at existing components manufacturers
• Increase local content of electronics, interior, body panel and engine components
Production of the electric car (Joule)
• Establishment of a electric vehicle industry in South Africa
• Establishment of an energy/fuel plan to support electric car industry
Buses, Taxis, medium and heavy commercial vehicles
• Leverage public transport procurement to generate enough demand for a viable local assembly of buses
• Leverage the extensive procurement in the taxi industry to attract a taxi assembly plant locally
•Enhance existing capacity of local industry to assemble commercial vehicles and “yellow goods”
52. Metal Fabrication, Capital and Transport Equipment Sector
Increase local content of SOE capex
•Leverage upon Transnet and Eskom strategic procurement to develop globally competitive local industry
•Utilise CSDP and Unido Program to attract OEMs to set up locally
•Identify and exploit CSDP opportunities from municipalities and other private sector
Resuscitate Foudries and Tool, Die and Mould (TDM) industries by 2020
•Roll-out of the National Foundry Technology Network Programmes
•Development of an internationally competitive tooling cluster in South Africa
•Scrap metal beneficiation to form either billets or coils, and thereby reduce exportation of local scrap metal.
Innovative Financing Programme for OEMs and local suppliers by 2011
• Design a funding instrument/scheme to increase participation levels of local suppliers in the SOE capex
53. Renewable Energy Components Sector
• Establishment of a local SWH manufacturing industry
• Concentrated Solar Power components manufacturing
• Wind energy components manufacturing
• Photovoltaic components manufacturing
54. Advanced Manufacturing Sector - What is it?
• Advanced manufacturing (AM) is a collection of high value adding manufacturing processes,
management techniques, technologies and knowledge capital that occupy the top-tier in
manufacturing industries and drive competitiveness in the local and global economies.
• A combination of the following concepts are typically associated with AM:
– Focused R&D & Innovation
– Intellectual Property
– Sophisticated computer controls,
– Concentrated bodies of expertise,
– Advanced processes,
– High value products,
– Processes, products and technologies that are not easily replicable,
– Industry leading /industry changing concepts.
Advanced manufacturing is also associated with mastering highly regulated safety and/or
quality requirements, the exploitation of intellectual property in the form of world class
processes, products and services.
55. Sector Strategy
Nuclear Build Programme
•Fabrication and components supply into the nuclear build programme
•Localisation and technology transfer partnerships with multinationals
•Fuel Supply facility
•Development of non-energy nuclear applications
Advanced Materials
•Development of advanced material value chain
Aerospace
• Integration of local industry into the global value chain
•Development of tier-2 and tier-3 suppliers
•Consolidation of the Centurion Aviation Village cluster
