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Chapter 1 Investment

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IDC’s role in driving the country’s growth

In 2010, the Industrial Development Corporation (IDC) celebrated its 70th anniversary. From its first loan of R3 000 which launched the Ouma Rusks brand in 1941, the IDC has grown into a development institution charged with enhancing the industrial capacity not only of South Africa, but the rest of the continent. By providing developmental finance to meet the government’s national development priorities, the IDC has helped shape this growing nation’s economy, positioning itself to help put South Africa on a new growth path. The IDC’s role in sustainable economic development has evolved in line with the economic challenges facing South Africa. It not only supports large development projects, but 46

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promoting entrepreneurship – the lifeblood of the economy. During 2010, the organisation approved funding of R9,4bn to businesses in South Africa, helping to create and save 25 000 jobs and fulfilling its mission of contributing to sustainable economic growth. It will play a critical role in helping government achieve its target of creating employment over the next decade. To do this, the IDC plans to provide increased funding to enterprises in line with sectors identified in the new growth path plan and the Industrial Policy Action Plan. The IDC’s role in business development is more than that of a financier. It provides technical support to enterprises, linking them with appropriate incentives. The IDC’s commitment to


investing in growth sectors is underpinned by its core values of partnership, professionalism and passion. Investment principles are based on good corporate governance, as well as broadbased and expansionary black economic empowerment. Greening South Africa’s economy To support government’s efforts to make the South African economy less carbon intensive over the coming decades, the IDC has adopted a pro-active approach to the development and investment in green industries and technologies. It aims to be a lead financier in green industrialisation in South Africa, focusing on different components of the green economy, in particular energy

efficiency interventions and renewable energy projects. The IDC’s green investment strategy promotes projects that will reduce carbon emissions, utilise renewable energy resources and create jobs in a green economy. For instance, it granted funding to Solar Heat Exchangers, a company specialising in the installation of solar-heating solutions for both the domestic and commercial markets. This is in support of government’s target of installing 1 million solar water heaters by 2014 to replace energyconsuming electrical geysers. Increasing electricity prices and improved environmental awareness has helped convince many consumers to convert to solar power from electrical

geysers and the market is also expected to benefit from approximately 250 000 new houses being built each year as part of government’s housing programme. The IDC also approved a loan to African Realty Trust (ART), one of the biggest family-owned citrus farming operations in South Africa for a fuel-switch project. The project will not only result in savings for ART in terms of fuel costs, but will also qualify for Verified Emission Reduction (VER) income once the project has been commissioned and is operational. The funding will be used to upgrade ART’s existing peel drier furnaces to use wood biomass as fuel instead of coal. Not only will the project help the company to move away from fossil-fuels Best of South Africa

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but will utilise waste generated in the timber production process, which would otherwise be land-filled. ART is a major job creator in the Limpopo Province and through the fuel switch project more job opportunities will be created. A workers trust will also be established and 10% of the VER revenue will be paid to this trust for the benefit of ART’s workforce to assist with housing development and educational programmes. In support of government’s new growth path plan, the IDC will play a coordinating role in the green economy. It is developing an energy efficiency programme to encourage local industries to improve energy efficiency and green their buildings. The IDC’s purpose extends to the identification and development of project opportunities, and finding additional investors in renewable energy projects. Finding innovative solutions for affordable housing The South African government has built 1,2 million houses, shelter to at least five million people. Yet, it is still confronted with a backlog of between two to three million houses to be built over the next few years. The IDC is collaborating with fertiliser manufacturer, Foskor to use gypsum, a waste product generated in its production process to build pre-cast panels for buildings. Using a technology developed in Australia called RapidWall, the IDC aims to gain the necessary regulatory approval to manufacture the prefabricated panels in South Africa. Compared to conventional brick and mortar building costs, Rapidwall houses are up to 20% cheaper and can be built in just a few hours. The panels are also able to bear loads and can be used to build schools, clinics, libraries and multi-story buildings. Rapidwall is ideal for use in affordable housing projects and the IDC has secured exclusive rights for the patented technology for use in South Africa and other parts of Africa. RapidWall was awarded the prestigious 2009 Global Gypsum Product of the Year award and was recognised as a Good Practice by the United Nations Habitat business awards for sustainable urbanisation. A house made from the panels has also been built in Richards Bay to showcase the prefabricated walling system to housing departments as well as the private sector. Beneficiation of rare metals South Africa is the world’s second largest producer of titanium minerals after Australia, with approximately 40-45% of the world’s “Tiomin” ores (Ilumenite, Rutile and Zirconium Silicate).These ores are mined and a basic beneficiation into titanium slag and zircon sand (concentrates) is performed and then exported without major beneficiated value-add. To beneficiate these ores into high-value pigments and extract high-value Titanium, zirconium and silicon metals requires very specialised technologies which are guarded and owned by 48

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companies in the US, Russia and France. The IDC has collaborated with the National Empowerment Fund , Magnesium & Metals of Russia and Rare Metals Industries of South Africa by investing R40 million in a feasibility studies to develop a project to beneficiate Tiomin ores. The beneficiation project aims at constructing an unprecedented and worldfirst integrated pure metals refinery complex producing Titanium, Zirconium , Magnesium and Silicon with their respective derivative products. Depending on the final outcome of the feasibility studies, the full capital cost of the project is estimated to be over US$1,5 billion, in what would be a ground-breaking venture from a South African and global perspective. Access to the pure minerals creates the potential for downstream local industries to emerge, such as the production of microchips for computers and mobile phones, lightweight alloys for aerospace, semiconductions, poly-voltaic panels to harvest solar energy and various products for the pharmaceutical industry. It is expected that the project will generate at least 2,800 skilled jobs during the construction phase and in excess of 5,000 permanent jobs once the plant is fully operational. Developing rural areas The IDC helps create capital intensive industries that lead to industrialisation and the development of self sustaining local economies. At Richards Bay, the IDC funded Alusaf, Richards Bay Minerals, and IOF. At Secunda, Sasol was established, while Foskor and PMC were founded by the IDC in Phalaborwa. The IDC has also helped develop industries and jobs in Saldanha Bay through Saldanha Steel, Duferco and Namaqua Sands. Three decades ago these areas were classified as rural or semi-rural. They have now grown into well-developed towns with strong economic bases. The IDC has invested R3.5 billion in the Kalagadi Manganese Project, which has the potential to have a similar significant impact in the rural towns of Hotazel and the Coega Industrial Development Zone. Both are in poor provinces that qualify for the equality of provinces initiative. A manganese ore mine producing 3 million tons per annum (tpa) and a 2.4 million tpa sinter complex will be established at Hotazel in the Northern Cape, with construction to commence by late 2011. In addition a 320 000 tpa ferromanganese alloy production facility is to be constructed at Coega in the Eastern Cape. Ferromanganese is an essential ingredient in the production of steel, a commodity expected to show good growth in the next decade. The total capital outlay of the Project is R11.9 billion. Although highly capital intensive in nature, the project will bring great benefit for the South African economy through its strong linkages with domestic suppliers of goods and services. An estimated R8.9 billion will be

spent locally during the construction phase alone. During the operational phase it is estimated that R7.6 billion will be spent in the domestic market during the first full year of production. This will boost sales of supplies such as chemicals, fabricated metals, energy, machinery and equipment, transport services and a range of other goods and services. The impact of the project will be economywide. Not only will Kalagadi generate increased economic activity throughout various sectors of the South African economy, it will create much needed jobs.

www.idc.co.za Best of South Africa

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IDC Special Report  

Industrial Development Corporation (IDC): IDC’s role in driving the country’s growth.

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