2019

Integrated
ReportThe IDC is a state-owned development finance institution
primarily mandated to provide funding for the development ofindustry in South Africa and the rest of Africa.
I N D U S T R I E S T H AT W E F U N D
METALS AND MININGVALUE CHAIN

AGRO-PROCESSING AND
AGRICULTURE VALUECHAINCHEMICALS AND
PHARMACEUTICALSVALUE CHAIN

INDUSTRIALINFRASTRUCTURE

CLOTHING,TEXTILES, LEATHER AND
FOOTWEAR

NEW INDUSTRIESOTHER MANUFACTURING
AND RELATEDINDUSTRIESTOURISM,MEDIA AND ICTValue approved: share of total value approved (2015 to 2019)
Number approved: share of total number of transactions approved (2015 to 2019)
Portfolio: share of the IDC’s exposure to the industry relative to total exposure - total portfolio valued at cost as at 31 March 2019
Jobs: share of total jobs expected to be created and saved (2015 to 2019)

Industrial
capacity
development

PERFORMANCEOVERVIEWTABLE OF CONTENTS

192 TRANSACTIONS APPROVED

R13.1 billion

22%

TOTAL FUNDING DISBURSED

R11.8 billion

23%

NUMBER OF JOBS EXPECTED TO BE CREATED AND
SAVED (CREATED: 14 620; SAVED: 4 558)

19 17836%

APPROVED FOR THE MANUFACTURING SECTOR

R7.4 billion

8%

APPROVED FOR BLACK INDUSTRIALISTS

R6.0 billion

24%

APPROVED FOR BLACK EMPOWERED COMPANIES

R8.3 billion

14%

About this Report......................................................................................................2
Minister’s Foreword..................................................................................................4
Chairperson’s Statement.........................................................................................6
Company Overview..................................................................................................8
Regional Footprint....................................................................................................9Business Model..........................................................................................................10
Key Stakeholders.......................................................................................................12
Making Trade-offs.....................................................................................................14
Strategic Business Risks...........................................................................................15
Selected Performance Indicators........................................................................16
Material Matters and Materiality..........................................................................17
Our Strategy................................................................................................................18
Our Development Outcomes and their Contributions to SDGs,
the NDP and the NGP..............................................................................................19
Operational Structure..............................................................................................20
2019 Performance Trends......................................................................................22
Our Board of Directors.............................................................................................24
Chief Executive Officer’s Statement....................................................................26
Our Executive Management Team......................................................................28
Leading Industrial Capacity Development......................................................30
Addressing the Marginalised................................................................................52
Our B-BBEE Rating.....................................................................................................54
Committed to Good Governance........................................................................55
Ensuring Financial Sustainability.........................................................................82
Assurance Report......................................................................................................88
Glossary........................................................................................................................91
Contact Information.................................................................................................92
Administration...........................................................................................................94

ADDITIONAL ONLINE INFORMATIONGroup Structure
Board Directorships
Carbon Footprint
Corporate Social Investment
Human Capital

Procurement
Special Funding Schemes
Memberships
King IV Checklist
GRI Table

APPROVED FOR BUSINESSES WITH WOMEN OWNERSHIP OF MORE THAN 25%

R3.0 billion

37%

APPROVED FOR BUSINESSES WITH YOUTH OWNERSHIP
OF MORE THAN 25%

R823 million

15%

NET PROFIT AFTER TAX (EXCLUDING CAPITAL PROFITS)

R720 million

14%

Financial CapitalIntellectual CapitalSocial Capital

Manufactured Capital

Human Capital

Natural Capital

Icons denoting assurance

TOTAL ASSETS

R145 billion

Navigating this report

6%

Denotes Limited
Assurance

Denotes Reasonable
Assurance

Icons denoting availability of additional information
Additional information available at www.idc.co.za
Additional information available elsewhere in this reportABOUT THIS REPORT
Various reporting frameworks, principles, benchmarks andstandards have been developed to drive the relevance andquality of reporting content and encourage better corporate
decision-making, long-term value creation and transparency.
While the frameworks generally share common objectives, eachone has a purpose, approach or area of focus that relates to the

IDC’s objectives and its regional, industry, Environmental, Social,and Governance (ESG) and socio-political contexts.
The IDC uses the most widely regarded reporting frameworks inpursuit of the objectives listed in the table below.

How IDC uses selected reporting frameworks to achieve the objectives of integrated reporting

GRI Standards

Public Finance Management Act

National Development Plan

GHG Protocol (Carbon)

King IVIR Framework

Framework has some relevance

Sustainable Development Goals

Framework is highly relevant

To guide the development of strategy and report content
To guide the reporting approach

Development
outcomesalignment with
NDP and SDGs

To guide the structure and presentation of information
As a benchmark (or standard) against which to align report content
To comply with regulations
To establish credibility

The Corporation’s approach regarding the frameworks that we
use or reference in our integrated reporting process was informed
by generally accepted best practices in the South Africanbusiness area, investor and other key stakeholder expectations,
our operating context, internal knowledge and capacity and theextent to which each framework is currently relevant and could
wholly or partially contribute to the objectives of integrated
reporting.
The focus is on our means of creating value and we have been
guided by the Integrated Reporting Framework issued by theInternational Integrated Reporting Council (IIRC). This report isfurther aligned with selected principles of King IV, the Greenhouse
Gas (GHG) Protocol, the Sustainable Development Goals (SDGs),
the National Development Plan (NDP), the Public FinanceManagement Act (PFMA) and the Global Reporting Initiative(GRI). The diagram on page 3 provides an overview of how

2reporting frameworks and other guiding documents interact toshape the IDC’s reporting and communication, governance andstrategy.

King IV
IDC subscribes to the principles of good governance as espousedin King IV.

King IV
checklist

GHG Protocol
IDC uses the GHG Protocol to identify and quantify our CO2e
(carbon dioxide equivalent) emissions.

Sustainable Development Goals
IDC contributes toward the realisation of the SDGs through ouractivities. Our material issues and the way in which these alignwith the SDGs are shown on page 17.

Carbonfootprint

Governing principles and standards

Interaction between IDC’s strategy, governance andreporting and SDGs
REPORTING AND COMMUNICATIONSGOVERNANCE

SDGs

GRI STANDARDS

NDP
PFMA

IDC ACT<IR> FRAMEWORKSTRATEGYKING IV

Scope and boundary of reporting
This Integrated Report covers our strategies and performance forthe period 1 April 2018 to 31 March 2019.
The report extends beyond financial reporting to include
information about non-financial performance, strategies,
activities, risks and outcomes attributable to or associated withthose of our key stakeholders who have a significant influence on
the IDC’s ability to achieve its mandate.
There have been no significant changes to the scope, boundaryor measurement methods applied in this report as comparedto the previous financial year and no restatements have been
made unless otherwise indicated in the relevant section.
The financial information presented in this report includes
information for the IDC and consolidated information for theGroup. The IDC implemented the IFRS 9 accounting standard in
2019. Comparative figures have not been restated but all ‘Day 1’
adoption movements have been adjusted through reserves.
The carbon footprint information published online includes the
carbon footprint for IDC and its significant subsidiaries.

The report is further informed by the following legislation andstandards:•	The Public Finance Management Act, 1 of 1999, as amended(PFMA)• The Companies Act, 71 of 2008, as amended• The International Financial Reporting Standards (IFRS)•	The Industrial Development Corporation Act, 22 of 1940, as
amended•	Internally-developed guidelines and policies.

Reporting principles, assurance and approval
Our combined assurance framework brings together all assurance
activities, identifies internal and external assurance providers andensures that actual assurance takes place and is reported within
our governance structures.
A combined assurance team from SNG Grant Thornton (JHB) andNgubane & Company (JHB) Inc., supported by our internal audit
team, provided assurance for the report. The IDC Board Audit
Committee verified the independence of the external assurance
providers. The IDC Board approved the report as recommended
by the Board Audit Committee. Selected performance
information was assured at a limited assurance level according
to the International Standards for Assurance Engagements (ISAE
3000).

Assurance
reportForward-looking statements
This report contains forward-looking statements about
the performance and position of the IDC. In line with therequirements of the PFMA, our annual Corporate Plan contains
a three-year forward perspective. These projections are basedon the views of the directors and assumptions about local andglobal economic and political conditions. As such, these forwardlooking statements are subject to risk and uncertainty and havenot been reviewed or audited by our external auditors.
We appreciate your feedback. Kindly submit queries andcomments to service@idc.co.za.

Materiality and Capitals
Materiality and material matters
We define the materiality of matters for reporting purposes as those that are relevant to our strategic goals as a state-owned
development finance institution and those that have the potential to substantially affect our ability to create and sustain value
in the short-, medium- and long-term. We have used issues arising from our stakeholder engagement processes to determinemateriality.
Capitals
The IDC aims to support the development of industrial capacity in South Africa and create long-term value. Doing so depends
largely on the availability of various forms of capital (as inputs). We describe how the capitals are used and modified (value-adding
activities and outputs), our impact on the capitals and, relatedly, the value created or diminished (outcomes) in our business model.

3

Material
matters

Capitals inour businessmodel

Minister’s
Foreword
The IDC results contained in this report coincide with the beginning of
the 6th administration of the democratic South Africa.
The focus of the new administration is to boost economic growth andenable deeper levels of economic inclusion and transformation.
A new Department of Trade, Industry and Competition has been
established, through a merger of the dti and Economic Development
Department, which will drive the implementation of a more focused,high-impact industrial strategy.
Over the next five years, the focus will be on practical actions andimproved governance.

funding, like: clothing and textiles, agro-processing, metal value chains,chemical value chains, the automotive industry, tourism, and the digital
economy.
The IDC will have to play a key role in unlocking growth in these sectors.
In the last five years, the IDC approved R71.1 billion and disbursed
R60.4 billion, much of this in support of priority sectors. This funding is
expected to create or save 105 000 jobs.
In the period ahead, the IDC will be required to help identify opportunities
for industrial expansion and growth and put in place support that goesbeyond the provision of funding.

We will have to work very hard, as government, as SOEs and as business
and workers, to pull our economy onto the higher growth levels werequire to create decent work and entrepreneurial opportunities formany more South Africans, particularly young people. There are no quick
fixes if we want to build this high-growth, high-employment, highinclusion economy.

Second, to improve the levels of fixed investment in theeconomyThe role of industrial policy is to unleash private investment and energise
the state to boost economic growth and inclusion. This is an essential
part of building investor confidence and the platform for job-creation.

The state’s role will be to enable higher levels of fixed investment (bothdomestic and foreign), through addressing infrastructure and skills gaps;
and by partnering with the private sector through a range of incentives
and financial packages.

The IDC will have a critical role to play in this new industrial strategy,
as a source of both industrial funding and industrial know-how withingovernment.
As priorities for the new Administration we have outlined six focus areasin the trade, industry and competition portfolio, within which the IDC
falls:First, to support improved industrial performance, dynamism
and competitiveness of local companies.
The President announced in SONA that we will develop a number ofMaster Plans to help create conducive conditions for industries togrow. This will include assisting companies to improve their industrial
capacities and sophistication, focusing more on export orientation, andreclaiming domestic market space lost to imports.
The Master Plans will be action-oriented, developed and carried out in
partnership with business and labour and implemented in stages, sothat we can move immediately. Master Plans are being developed in a
number of priority sectors, many of which are already key targets for IDC

4Over the five year period from 2018/19, we have set a target of R1.4
trillion in new investment in the economy. The vast bulk of this mustcome from the private sector.

With the consolidation of the two departments of Government, it will
now be easier to integrate the financial packages within the Department
and the IDC to ensure higher impact that will facilitate that moreinvestors can access the facilities.
In the next five years of this new administration, the IDC is expected toapprove nearly R110 billion in industrial funding. We will be looking to
unlock more private investment per rand of public resources available.
In the last five years, IDC funding has crowded in R89 billion from theprivate sector to support the growth of local industry. Partnership withthe private sector is key to achieving the IDC’s broad mandate, and wewill look to the institution to deepen its relationships with commercial
banks and other industrial partners to improve the quality and reach of
the investment pipeline.
The Corporation will be a key organising agency for the 2nd South
African Investment Conference, scheduled to take place between 5
and 7 November, 2019. Last year’s conference drew commitments of
R300 billion in support of the President’s investment drive.

Third, to expand markets for our products and facilitate entry
to those markets.

We will dedicate high-level human resources over the next few years to
the SEZ programme.

The single biggest initiative is the African Continental Free Trade Area
(or AfCFTA as it is called) which will connect 1.2 billion people into asingle bloc where local products will be traded between countries,
with minimal tariffs. These agreements lay the basis for increased intraAfrican trade and can cement the continent’s position as the next growth
frontier.

The IDC has supported key investments in SEZs, like the Beijing
Automotive Industry Holding Company (BAIC) which has establishedSouth Africa’s first new light vehicle manufacturing facility in over 40
years in the Coega SEZ. The learnings from these investments will bedrawn upon as we designate and enhance other SEZs across the country.

The implementation phase was launched on 7 July 2019, at a Special
African Union Summit meeting in Niger, after 54 countries signed theAgreement and more than 25 countries have now ratified it. It is intended
to come into effect next year on 1 July 2020.

As the SEZ and industrial park programme become a greater magnet
for new industrial opportunities, the role of the IDC in attracting newinvestment into the designated areas will be stepped up.

Sixth, to improve the capability of the state.
The Agreement will fundamentally change and reshape the South
African economy. Already, exports to other African countries support
about 250 000 South African jobs and it is the fastest-growing market forour manufactured exports.
The IDC’s role in helping South African companies unlock the potentialof the new Free Trade Area is critical. The IDC will need to thinkstrategically around how it will support South African industry throughthis implementation phase. The main focus of the IDC will be investment
in South Africa, to help local companies expand their production
capabilities and to provide working capital for increased output.
Where IDC provides funding for industrial or infrastructure projects
elsewhere on the continent, it should assist South African based
suppliers to provide the goods and services required, further enhancing
intra-regional development, and trade and capital flows.

This means being more responsive to the needs of South Africa’s
entrepreneurs, moving faster in making decisions and carrying out
functions, coordinating better between departments and agencies andcreating a business-encouraging environment in which more investment
and more job creation can take place.
Part of a smart state is partnering with domestic businesses to invest
more in innovation and R&D, as new techniques, new products and new
distribution platforms can move South Africa up the value-chain andenhance job creation.
All public entities, including the IDC will have to work with a greater
sense of urgency to support government in achieving its ambitions forthe new administration. This is what the President has called the spirit of
Khawuleza, and it must define our approach both within Government
and the SOEs to addressing the structures in the economy which impede
growth, economic inclusion and job creation.

Fourth, to promote economic inclusion.
This means opening up and changing our market structure, to bringmore young people, women and black industrialists into the economy.
The IDC can play a role through the provision of funding and by linking
suppliers from designated groups to large projects that the IDC co-funds.
In 2015 I established five-year targets for the IDC for funding for Black
Industrials (R23 billion), women- and youth-empowered enterprises(R4.5 billion each). With a year still left, the IDC has exceeded the targets
for women- and youth-empowered enterprises, with R9.5 billion andR5.1 billion approved respectively. The Corporation has also approved
R21.4 billion for black industrialists and is on track to meet the R23 billion
target by the end of this financial year.

These efforts will need to be scaled-up in the next 5 years. Over this new
administration, we will bring the combined efforts of the Department,
the NEF and the IDC (as well as a number of private sector dedicatedfunds) into a seamless and coordinated programme to support Black
Industrialists and other designated groups, with more than R40 billion
in financial support targeted through identifying sustainable businesses
and promoting both industrialists, new enterprise formation and worker
involvement in the enterprises. The Corporation is also expected toprovide R10.8 billion in funding to women-empowered businesses andR5.5 billion in funding to youth-empowered businesses over this new
administration. Additional work will be done to review these targets andwhere possible, increase the youth funding target.

While the results of this financial year are weaker than previous years,
with lower levels of approvals and disbursements and higher impairment
levels, the Corporation can use the new policy framework and the accessto a wider range of complementary resources in government to improve
its impact and leverage more through partnerships with other parties,
not just within industrial financing but also in supporting the shaping ofpolicy instruments for real, inclusive growth.
To support this drive, the IDC will be refocused to provide a greater levelof investment promotion services, including support to break into newmarkets particularly for the AfCFTA. The IDC has the capacity to be morethan just a bank. The Corporation will be re-positioned to be an initiatorand facilitator of industrial development opportunities, with a mandate
to manage programmes, unlock investment and growth and use its deepindustrial knowledge-base more actively.
The hope of our ordinary citizens, who have not fully tasted the fruitsof democracy lies in the visible and accelerated impact that we havecommitted to in the next five years. This will be only be achieved throughdedication and collaboration.
I wish to thank Ms Busisiwe Mabuza and the Board of the IDC for theirguidance of the Corporation, support to IDC’s management as well as
for upholding a strong governance culture. I also wish to thank Geoffrey
Qhena for his years of service to the Corporation and thank TP Nchocho,
the IDC’s new CEO for the leadership and commitment he has displayedin moving the Corporation forward since joining the institution in
January 2019, in partnership with his staff and the management team.

Fifth, to promote more equitable spatial and industrial
development.
A pillar of our industrial policy is to develop new investment clusters
through special economic zones, revitalisation of industrial sites andsupport for business and digital hubs.

Ebrahim Patel
Minister of Trade and Industry

5Chairperson’s
Statement
Despite signs of improving sentiment in the opening months ofcalendar year 2018, the domestic economic environment remained
quite challenging for most of the year. Heightened uncertainty on
the global front continued to characterise most of the past financial
year with destabilising effects on trade flows and the world economy,
including South Africa.
Increased tensions in the global trading environment, monetary policy
normalisation in some advanced economies, continued uncertainty
over Brexit and geo-political risks, weighed on the world economic
environment. Accordingly, the pace of expansion in the global economy
slowed, albeit marginally, to 3.6% in 2018 (2017: 3.7%), and a further
deceleration to 3.3% is anticipated by the International Monetary Fund(IMF) in 2019. The slowdown forecast by the IMF for the economies ofChina, the United States of America and the European Union, does notbode well for South Africa’s economic performance.
Having faced considerable headwinds, both of a domestic and global
nature, the South African economy weakened markedly in 2018. Its
gross domestic product (GDP) increased by only 0.8% in real terms,
while the first quarter of calendar year 2019 saw GDP contract by 3.2%.
Weaknesses were observed across most of the broad economic sectors,
including those in which the IDC operates, as well as across the various
drivers of domestic demand.
Total fixed investment spending in the economy declined by in 1.4% realterms in 2018. Since the global financial crisis in 2008, the IDC has playeda countercyclical role, maintaining high levels of funding. However, inthe face of a persistently weak operating environment, the IDC has notbeen able to sustain this trend as a lower appetite for investment in theprivate sector has reduced demand for our funding. At the same time,
investment spending by public corporations declined sharply as these
entities faced financial constraints and operational challenges, which
delayed the roll-out of critical capital expenditure projects.
Unfavourable trading conditions took a toll on the business sector,
thus impacting on our funding activity and some of our development
outcomes. Distressed businesses continued to make up a significant
proportion of our financing activity, exerting pressure on our balance
sheet. The Board and management are addressing the impact of such
trends on the IDC.
The IDC has, however, continued to contribute to the expansion andtransformation of the South African economy, playing an importantrole in the development of several key projects. Among these is a newvehicle assembly plant, the first in nearly four decades, at the Coega

6

Special Economic Zone in partnership with Chinese automaker, Beijing
Automotive Industry Holding Co., Ltd. (BAIC). Yet, the persistently highlevel of unemployment affecting the well-being of millions of South
Africans, particularly our youth, calls for greater urgency for the IDC in
driving jobs-rich and inclusive industrialisation.
Over the past five years to March 2019, the IDC approved funding
totaling R71.1 billion and cumulative disbursements of R60.4 billion.
This financing activity resulted in the creation or saving of more than
105 000 direct jobs, improving the livelihoods of many South Africans.
Furthermore, the impact of our disbursements extends beyond theactual transactions and projects financed due to multiplier effects
through linkages with other sectors of the economy.
Women-empowered businesses were funded to the amount of R12.2
billion over the five-year period to March 2019, while cumulative
approvals to youth-empowered businesses increased to R5.2 billion,
exceeding the five-year target of R4.5 billion set in the 2016 financial year.
We are proud of and encouraged by this achievement.
Overall, our long-term strategy has generated positive results. However,considering the challenging operating conditions both domesticallyand in external markets, including in the African continent, some ofour envisaged developmental outcomes have not been realised fully.
The pace of establishing regional value chains that link South Africanindustries with those of our neighbouring countries has been very slow,
impacting negatively on the envisioned funding opportunities for the
IDC. The development of a sizeable project pipeline has also remained achallenge. Accordingly, we will improve our engagements with the restof Africa going forward, not only to position the IDC for opportunities
that are likely to emanate from the Africa Continental Free Trade Area,but also to increase deal activity in line with our strategic priorities,
including support for value chain integration throughout the region.
As we strive to increase our industrial development activities while
ensuring our financial sustainability, the IDC intends to leverage its
resources through close collaboration with stakeholders, including
strategic partnering with fellow development finance institutions, stateowned entities and government departments.
We anticipate that the free and fair elections held recently in South Africa
will have a positive impact on investor, business and consumer confidence.
This should result in higher levels of household and business spending,
production activity, fixed investment and, consequently, employment
creation. We will reap these benefits only if all relevant stakeholders,
including Government, commit to addressing the constraints thatare holding back the economy’s growth potential expeditiously andeffectively. This includes ensuring the security and reliability of energy
supply, addressing bottlenecks in transport and logistics infrastructure,strengthening governance at state-owned entities and improving theirfinancial standing and operational performance, as well as reducing theoverall cost of doing business in South Africa.

Securing financial sustainability and good governanceIn response to the continually strained operating environment, we haveprioritised efforts aimed at securing the IDC’s financial sustainability, inparticular considering various options to address the key risks to ourfinancial performance.
Also critically important is our focus on diversifying the sources ofcapital, while managing operating costs and working towards reducing
the cost of borrowings. In addition, enhancing the performance of ourinvestment portfolio, especially significant subsidiaries, and improving
revenue collection are receiving particular attention.
The period under review saw a sharp rise in non-performing loans. This
was attributed to subdued economic conditions, support for distressedbusinesses and the poor performance of some of investments in other
African countries. IDC management has proposed specific interventions
for the affected clients, which are currently being implemented.
The IDC is expected to play a meaningful role in various Government
initiatives unveiled in 2018, such as the Economic Stimulus and Recovery
Plan. We have adopted a focused approach in this regard, endeavouring
to increase our funding activity in specific economic sectors among
other initiatives. In so doing, we will ensure that we do not weaken the
IDC’s financial base or compromise its long-term financial sustainability.
Pleasing improvements in the performance of companies within Scaw,
where we introduced strategic equity partners, were attained during theperiod under review. However, some of the IDC’s significant subsidiaries
continued to underperform. Considering their strategic role in the IDC’s
sector development strategies, we established a dedicated department
during the financial year to enhance the monitoring and managementof material investments and subsidiaries to improve overall performance.
The IDC Board also established an ad-hoc subcommittee to assist Foskor,
whose financial performance has been affected negatively by weak
and volatile market conditions, as well as by plant inefficiencies andshutdowns in recent years. Various long-term strategic and operational
options were considered during the reporting year, which are underreview.

We remain committed to sound corporate governance and transparent
processes across the Corporation, always seeking to improve on ourgovernance standards and protocols to maintain the Corporation’s
reputation as a credible and trustworthy business partner.
The Board Social and Ethics Committee continues to oversee the legal
processes instituted against Oakbay Resources to recover the IDC’s
investment in the company and the payment of accumulated arrears.
We also publish, on as quarterly basis, a detailed list of IDC-fundedbusinesses on the IDC website to increase transparency.

Acknowledgements
Despite a difficult year for the South African economy, the IDC continued
to achieve positive outcomes, albeit lower than in the previous year.
These outcomes would not have been possible without the continued
efforts of the IDC’s management and employees. The year also saw
the end of an era for the Corporation, for Mr Geoffrey Qhena stepped
down as CEO at the end of December 2018. After 13 years at the helmof the Corporation and almost 20 years of service to the IDC, we thankhim for his commendable stewardship and wish him well in his futureendeavours.
Mr TP Nchocho took up the baton as CEO of the IDC in January 2019.
He brings with him commitment to, as well as a wealth of experiencein, development finance. The Board looks forward to a renewed sense ofcommitment at the Corporation as he, his executive team and the rest of
the staff take the IDC into the future with the guidance and support ofthe dedicated non-executive Directors on the Board.
Finally, on behalf of the Board, I express our appreciation to Minister
Ebrahim Patel for his guidance over the years. Our gratitude is also
extended to the previous members of the various parliamentarycommittees for their diligent oversight and encouragement over theyears. We look forward to interactions with the Portfolio Committee on
Trade and Industry.

BA Mabuza
Board Chairperson
29 July 20197

COMPANY OVERVIEW

WHO WE ARE
The Industrial Development Corporation (IDC) of South Africa Limited was established in 1940 through an Act of Parliament(Industrial Development Corporation Act, 22 of 1940) and is fully owned by the South African Government. The IDC’s priorities arealigned with the national policy direction as set out in the National Development Plan (NDP), New Growth Path (NGP), National
Infrastructure Plan (NIP), Industrial Policy Action Plan (IPAP) and Agricultural Policy Action Plan (APAP). Our mandate is to maximise
our development impact through job-rich industrialisation, while contributing to an inclusive economy by, among others,
funding black-owned and -empowered companies, Black Industrialists, women and youth-owned and -empowered enterprises.
At the same time, the IDC must ensure its long-term sustainability through prudent financial and human resource management,
safeguard the natural environment and increasingly position itself as a Centre of Excellence for development finance.

VISIONMISSION

To be the primary driving force
of commercially sustainableindustrial development andinnovation for the benefit of South
Africa and the rest of Africa.

The Industrial Development Corporation is a national development finance institution
whose primary objectives are to contribute to the generation of balanced, sustainableeconomic 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 andenterprises based on sound business principles.

OUR VALUESOUR FUNDING MODEL

Our day-to-day activities and business conduct are guided by ourvaluesThe IDC is funded through:Divestment of mature investments
Borrowing in domestic and international markets

PassionPartnership
Professionalism

We use this capital to provide funding tobusinesses in the form of loans and equity
investments

LOAN FUNDING

EQUITY FUNDING

Interest payments

Dividend receipts

Capital repayments

Capital growth andrealisation

Proceeds from this funding are used to repay borrowings, cover ourcosts and grow our balance sheet to re invest in future businesses

8

R E G I O N A L F O OT P R I N T
EASTERN CAPE
Regional offices:• East London• Port Elizabeth• Mthatha

GAUTENG
Head office:• Sandton

FREE STATE

Value approved
Contribution to GDP
Portfolio
Jobs

9%
8%
6%
7%

Regional office:• Polokwane

Satellite offices:• Thohoyandou• Tzaneen

NORTH WEST
Regional offices:• Mahikeng• Rustenburg• Brits

Value approved
Contribution to GDP
Portfolio
Jobs

Satellite offices:

1%
1%
2%

Contact
information

5%• Phuthaditjhaba• WelkomRegional offices:• Durban• Pietermaritzburg

Value approved
Contribution to GDP
Portfolio
Jobs

11%
5%

16%

13%

Satellite office:

28%
34%

Value approved
Contribution to GDP
Portfolio
Jobs• Bloemfontein

KWAZULU-NATAL

Value approved
Contribution to GDP
Portfolio
Jobs
30%

LIMPOPO

Regional office:29%• Richards Bay

MPUMALANGA
7%

16%

16%
8%

Regional offices:• Mbombela• eMalahleni

Value approved
Contribution to GDP
Portfolio
Jobs

8%
6%

9%

11%

Satellite office:• Secunda

Value approved
Contribution to GDP
Portfolio
Jobs

NORTHERN CAPE

2%
6%

Regional offices:9%• Kimberley• Upington

9%

Value approved
Contribution to GDP
Portfolio
Jobs

2%

11%

2%
22%

Satellite offices:• Klerksdorp• Vryburg

WESTERN CAPE
Regional office:• Cape Town

Satellite office:Value approved
Contribution to GDP
Portfolio
Jobs

OUTSIDE SA
7%
7%

12%
14%

Value approved

7%

Portfolio
15%• George

Value approved (provinces): Share of total value approved in SA (2015 to 2019)
Value approved (outside SA): Share of total value approved (2015 to 2019)
Contribution to GDP: Provincial contribution to total SA GDP (2017 calendar year)
Portfolio (provinces): Share of the IDC’s exposure to businesses in the province relative to total SA exposure - total exposure valued at cost as at 31 March 2019
Portfolio (outside SA): Share of the IDC’s exposure to businesses outside SA relative to total exposure - total exposure valued at cost as at 31 March 2019
Jobs: Share of total jobs expected to be created and saved (2015 to 2019). Jobs created and saved in investments outside South Africa are not captured for
performance purposes.

9

BUSINESS MODELC A P I TA L S
Financial capital• R145 billion in assets•	Dividends and capital profits
from equity investments•	Interest and capital repaymentsfrom loans provided•	Borrowings•	Funds managed on behalf ofothersSocial capital•	1 007 clients•	Network of entrepreneurs,clients and project partners•	Strong government ties•	Other funders and development
partners•	Targeted CSI and social
enterprise programmes

Human capital•	846 employees• Development-focused approach•	Diverse workforce of competentand skilled professionals

Intellectual capital•	High level of industry
knowledge and experience•	Project development and dealmaking experience•	Macro-economic and industryspecific research

AC TIVITIESProviding funding for industrial
development•	Assessing the viability of business plans•	Providing funding to potentially viablebusinesses•	Developing and funding industrial projects•	Sourcing partners for industrial projects
Supporting industry development•	Providing non-financial support toentrepreneurs•	Developing and managing specialised
funding products to address specificdevelopment outcomes•	Undertaking industry and economic
research•	Participating in government andprivate sector industry and economic
development initiatives
Supporting funding activities•	Sourcing and managing loans and otherfunds at the lowest possible cost to pass
the benefits onto our clients•	Managing our portfolio of loans andinvestments to ensure that we collectpayments, interest and dividends and exitfrom mature investments

Supporting our human capital•	Rewarding and investing in attracting,developing and retaining our employees•	Providing a safe work environment forour employees that is conducive toconstructive contributions•	Instilling a culture of responsible
leadership•	Transforming the work place throughemployment equity
Corporate support activities•	Maintaining and investing in managing ourfinances, IT systems and data, continuous
improvement of processes, maintaining
good governance and complying withlaws and regulations, managing risks, andmarketing activities of our business
Managing our impact on the environment•	Monitoring the carbon emissions of our
subsidiaries and major investments andtheir environmental policies•	Providing funding that reduces companies’
impact on the environment

TRADE-OFFS
Funding for capital-intensive
vs. labour-intensive
industries

Leveraging more funding
from the private sector vs.
increasing the IDC’s share offunding for projects

Focus on project development vs.
transactions with short-term outcomes

Performance of significant
investments

Carbon taxes paid by
the IDC, subsidiaries andassociates

Credit and investment risk

Impact of IFRS 9

Job creation

Macro-economic conditions

Manufactured capital•	14 regional and 9 satellite offices
across the country•	IT infrastructure and systems

KEY RISKSNatural capital•	Upholds strict environmental
standards•	Renewable energy portfolio andinvestment in energy-efficiency
technologies

10

OUTPUTSOUTCOMES

Funding provided•	R71 billion approved*•	R60 billion disbursed*•	961 transactions approved*•	R105 million approved for CSI and funding
in the social economy•	3 targeted funding schemes launched
Employees•	R92 million* invested in staff training•	20% of employees benefitting from staff
bursary programme
Industrial research•	10 industry research reports completed
covering electric vehicles, mining
equipment, railway equipment, coppercobalt, zinc, the biotechnology industry,
platinum group metals, the aerospaceindustry, iron ore and the video games
industry
Environmental impact assessment•	Environmental and social assessments
done for 62 clients•	Carbon footprint calculated for six
subsidiaries

Investment generated•	R160 billion investment generated*•	79% of funding approved for start-ups orfor expanding capacity*•	Developing priority industries with 52% offunding approved* for the manufacturingindustry, 22% for mining, 16% for services,
8% for electricity and 2% for agriculture
Community development•	54 746 individuals benefiting from Social
Enterprise and Special Intervention
Programme funding since inception in2012•	Facilitated the registration of 138 worker
and community trusts•	33% of the number of direct jobs that wecreated and saved were in rural areas
Employees•	86% black employees (67% of top andsenior management)•	53% female employees (37% of top andsenior management)•	R4.9 billion* for staff salaries and benefits

Transformation•	36% of funding* for black-owned
companies with 35% for Black Industrialists.
•	An additional 25% for black-empowered
companies•	17% of funding* for woman-empowered
companies•	7% of funding* for youth-empowered
companies•	Level 4 B-BBEE rating (amended FSC)

Job creation•	Funding expected to create 82 550 new
jobs and save an additional 23 060 jobs*•	An additional 270 000 indirect jobs
estimated to be impacted by our funding

Environmental footprint•	Scope 1 and 2 emissions intensity per
employee for IDC reduced from 7.8 tCO2e
to 6.5 tCO2e from 2014 to 2019

Financial sustainability•	R2.9 billion profits generated* excluding
capital profits•	18% growth in assets** Five years from 2015 to 2019

Supporting transactions thatcreate new jobs vs. assisting
companies in distress and saving
jobs

Taking more risk vs. reducing
impairments

Maximising short-term impact
vs. ensuring long-term financial
sustainability

Increased industrial developmentvs. negative environmental
impacts

GOVERNANCE
Electricity supply

Fourth Industrial
Revolution

Human capital capacity
to deliver on our
mandateMisalignment between
long- and short-termgoals

Sector concentrationand listed shareportfolio volatility

Winning organisational
cultureWe believe that good corporate governance is integral
to a sustainable business. We have always endeavoured
to implement sound governance practices aligned with
best-practice principles. This is also a requirement forcompanies for which we approve funding.
The IDC’s corporate governance structures are designed
to ensure that the Board and Executive Management can
exercise their fiduciary duties effectively and efficiently ina fair and transparent manner.

11

KEY STAKEHOLDERS
The information in this Integrated Report evidences how we create stakeholder value. Stakeholders are defined as a person,group or an organisation with an interest or concern in, or influence over the IDC and who can affect or be affected by ourobjectives, policies and actions.
Ourstakeholders

How we engage

Their needs andexpectations

Our expectations

How we create value

Employees
andprospective
employees• One-on-one engagementswith staff• Team and divisional
engagements• Internal and external
communication platforms• CEO feedback sessions• HC initiatives (e.g. EE Forum)• Staff engagements andculture surveys• Reward and recognition• Employee development
programmes and personal
growth• Good working
environment• Ability to make a valuable
contribution to SA’s
development ambitions• M otivated and empowered
employees• To be brand ambassadors• Further the IDC’s
development agenda• Enthusiasm, commitment
and skills• Service delivery mindset• Awareness of the IDC’s
funding activities anddevelopmental impact• Transformation• Personal development• Remuneration linked toperformance and value
created• Staff awareness of how
their work contributes tothe IDC’s value proposition

Clients andbusiness
partners• Regional roadshows• Business support• Customised products andservices• Client events• Government-sponsored
events• One-on-one engagements• Surveys• T ransparent and efficient
application process• Business support• Affordable and appropriate
pricing• Innovative businessplans that address SA’s
developmental needs• Honour financial and other
undertakings• Growing industrial
development funding
for Black Industrialists,
women, youth and otherentrepreneurs• Strengthen businesses
through business support• Interest and repayment
rates linked todevelopment impact

Shareholder• AGMs• Board strategy sessions• Presentations and reports
to Portfolio Committee on
Economic Development
and Select Committee on
Economic and Business
Development• Integrated Report• T ransparency and good
governance• Risk management andcompliance• Operational efficiency• Thought leadership• Lead sustainable industrial
development• A n enabling policy
environment• Policy certainty• Strategic leadership• Investment in government
priority areas• Socio-economic
development to fulfil ourmandateRegulators,
ratingagencies andfunders•••••

Ratings
Investor roadshows
Integrated Report
Results announcements
Stock Exchange
News Service (SENS)
announcements• United Nations Environment
Programme Finance Initiative
community participation• T ransparent and effective
corporate governance• Financial sustainability• Low lending rates• Consultation• Understanding of the IDC’soperating context• Funding schemes• Input for policy
development• Leveraging funding tobenefit SA• Industry economic
development

Communities• Regional offices• Community Trusts linked to
the IDC’s investments• CSI initiatives• Due diligence on theenvironmental and social
impact of investments• Job creation• Supporting climateresilient industries• Wide dissemination of
benefits• Business opportunities andinclusive growth• Compliance withenvironmental and social
legal requirements• Emission reduction• Water stewardship• S upport for IDC-linked
projects• Participation in IDC
initiatives• Sustainable water
resources• Productive land

• C ommunity and worker
shareholding in IDCfunded projects• Social and community
projects• Benefitting from poverty
reduction• Sustainable industrial
development• Utilising natural resources
to create value for current
and future stakeholders

Otherpartners• Engagements withacademics, industry bodies
and experts, DFIs, SOEs,
research institutions andorganisations• F unding and participationin pilot initiatives• Influencing policy
development• Entrepreneurship andinnovative solutions• Mutual partnership• Knowledge networks
that support sustainableindustrial development
and address the needs ofsociety12• Regulators• Government departments not
mentioned elsewhere in the table withan interest in IDC-funded sectors• National Treasury• Mature listed investments where IDC
has a low shareholding• Department of Small Business
Development (sefa)• Existing and potential clients• Strategic project partners• Employees• Lenders (bondholders, commercial
banks, DFIs, PIC, UIF)
• Portfolio Committee on Trade andIndustry and Select Committee
on Trade and Industry, Economic
Development, Small Business
Development, Employment andLabour• Economic Development Department• Department of Trade and Industry• The IDC’s subsidiaries• Media• The unemployed• Organised labour• Banks and other financial services
providers• Government departments not
mentioned elsewhere in the table• Governments of African countries
other than South Africa• Business associations• SOEs• Broader communities around IDCfunded projects• Provincial governments

High• Rating agencies

MediumLow

The stakeholder’s influence over the IDC

Stakeholder engagement is governed by our Stakeholder Engagement Strategy and Plan. External stakeholders are prioritised asindicated in the matrix below.

• Former employees• Potential employees• Higher education institutions• Activist bodies
Low• Suppliers

MediumHigh

The IDC’s impact on the stakeholder

Our aim is to strengthen our engagement with all our stakeholders. To this end, we conducted a multi-stakeholder reputation survey
during the year. The results indicated that public sector stakeholders have the highest level of reputation satisfaction, with the private
sector having the lowest. Within private sector stakeholders however, we have a high regard among small enterprises, women, youth andBlack Industrialists. Stakeholders generally felt that the IDC was making a positive contribution to the economy and to job creation. The
key concerns regarding business interactions with the IDC were around obtaining funding, as well as the time-consuming application
processes and the lack of communication and feedback on applications. The study indicates that the single biggest way of improving
our reputation is to focus on driving effective communication with our stakeholders. This includes improving engagement levels by
providing open and timeous feedback.
We place a lot of importance on customer feedback. In this regard we conduct customer satisfaction surveys annually and quarterly.
The annual survey is aimed at existing customers, i.e., those whose funding has been approved, and thus would have gone through theentire IDC application process, including post-investment. For the 2019 financial year we obtained an overall satisfaction rating of 7.9(2018: 7.8) on a scale from 1 to 10. The quarterly survey is aimed at applicants, including rejected applicants. For the 2019 financial year
we obtained an overall satisfaction rating of 7.2 in the quarterly surveys.
The common findings related to service issues from both surveys are: turnaround time, lack of communication and onerous information
requirements. The findings point to a continued need to focus on customer service and embed a culture of service excellence within
the corporation through various initiatives such as:• Streamlining our application processes, including the minimum information requirements• Improving our responsiveness• Tailoring our service to specific customer needs.
Internal stakeholders are discussed in the Human Capital section of this report.

13

Customer
relationshipmanagement

Investing in
humancapitalMAKING TRADE-OFFS
Competing needs from multiple stakeholders in a capital-scarce environment requires certain trade-offs to fulfil our mandate. Thisrequires proactively tough, yet balanced, decisions to direct resources effectively towards strategic focus areas that will create the best
long-term value while balancing the short-term needs of our stakeholders.
Description
Funding for capital-intensive vs. labour-intensive industries
The IDC is targeting job creation to alleviate unemployment. We balance investment in more capitalintensive industries that do not create many direct jobs but have the potential to unlock downstream
economic activity and increase competitiveness with investment in more labour-intensive downstream
businesses that create jobs, often at a lower cost but without a catalytic impact on industrial or value chain
development.
Leveraging more funding from the private sector vs. increasing the IDC’s share of project funding
The IDC prefers other funders, including project promoters, to participate in project funding to avoid
crowding out investment and permit the allocation of limited financial resources to other developmental
endeavours. However, partially-funded projects that do not attract other investors and are not
implemented will not contribute to development. Such partially funded projects require an increase in IDC
funding, especially where the potential impact is considerable.
Focus on project development vs. transactions with short-term outcomes
The IDC aims to develop industries proactively, specifically those identified as essential to the prioritisedvalue chains. We endeavour to optimise resource allocation between achieving short-term goals andinvesting in activities with a long-term impact.
Supporting transactions that create new jobs vs. assisting companies in distress and saving jobs
The IDC provides funding predominantly for start-up businesses and the expansion of existing businesses.
We also assist businesses that experience difficult trading/operating conditions with funding to build
their strengths and improve their competitiveness. In addition, our countercyclical assistance to distressedcompanies with long-term sustainability potential avoids negative de-industrialisation costs.
Taking more risk vs. reducing impairments
The IDC provides funding to entities with viable business plans. Given its higher appetite for risk, the IDC
can fund more businesses but with a potentially negative impact on impairments. Ideally, the IDC wants toincrease funding while simultaneously managing impairments downward. We manage increased funding/decreased impairment conflicts by continuously strengthening post-investment processes and monitoringhigh-risk clients and will continue with interventions to assist clients before they become financiallystressed. Decisions that reduce the IDC’s financial risk, such as not continuing support for a businessthat has proven not to be sustainable, can result in negative social impacts such as job losses. These
considerations are taken into account when such decisions are made.
Maximising short-term impact vs. ensuring long-term financial sustainability
High short- and medium-term funding levels can deplete the IDC’s funding capacity over the longer term.
This is exacerbated if funding does not deliver returns in the short-term. The IDC will continue to monitor
economic conditions and assess its capacity to increase funding levels by considering the performance of its
mature portfolio and new investments.
Increased industrial development vs. negative environmental impacts
The IDC provides funding to promote economic growth. Economic activity, in turn, impacts on theenvironment, while degrading environmental resources have negative impacts on long-term economic
growth. In assessing projects in which to invest, the IDC assesses the potential negative environmental
impacts and ensures that these impacts are mitigated in the project.

14

Affected capitals

STRATEGIC BUSINESS RISKS
Our annual risk assessment process identified the following high-ranking strategic risks that could have a material impact on theachievement of our objectives.
Risk
Performance of significant investments
Financial viability of significant investments and theirability to deliver effectively.
Carbon taxes paid by the IDC, subsidiaries andassociates
The high impact of the cost of carbon taxes payable
by the IDC, its subsidiaries and associates.
Credit and investment risk
Risk of non-payment by the IDC’s business partners
and non- recoverability of investments.

Electricity supply
The risk presented to the IDC’s investments due tounreliable electricity supply and the threat to the
IDC’s ability to implement its development agenda.
Fourth Industrial Revolution
The potential impact of 4IR and other technologicaladvances on competitiveness in South Africa and forthe IDC.
Human capital
The risk of inadequate or inappropriately-skilledhuman capital to achieve the deliverables of the IDC’s
strategy.
Impact of IFRS 9
Non-compliance with IFRS 9 and the introductionof IFRS 9 will have a negative impact on the IDC’s
income statement and balance sheet.
Job creation
Risk that the IDC may not be able to contributeadequately to job creation.

Macro-economic conditions
Macro-economic conditions or sovereign credit
downgrades with an impact on the IDC’s businessand ability to achieve strategic objectives.
Misalignment between long- and short-term
goals
Immediate socio-economic development needs
driving too high a focus on achieving short-termgoals that may not be sustainable over the long-term.
Sector concentration and listed share portfolio
volatility
The risk that the IDC portfolio concentration results
in investment value fluctuations that impact on
dividend income and balance sheet strength.
Winning organisational culture
Risk of the IDC’s culture and values not being alignedwith fulfilling its mandate or delivering on its
strategy.

Risk mitigation
Representation on key subsidiary boards. Monitor performance of subsidiaries andsignificant investments continuously. Dedicated department in the IDC to monitor andsupport these investments.
Carbon Tax Management Strategy for the IDC as well as at material subsidiaries andassociates. Audit the carbon footprint of the IDC and its key subsidiaries. Fund clean
technology energy efficient initiatives at subsidiaries.

Carbon tax
implications

Manage risk through quarterly Investment Monitoring Committee (IMC) meetings toensure that appropriate intervention strategies are in place to address risk. Well-defined
Credit and Investment Policy and approved Delegation of Authority Policy in place
to authorise transactions. The IDC’s Post-Investment Management Department andSubsidiaries and Significant Investments Department, housed in a dedicated division,monitor client performance and collections. The Workout and Restructuring Department
assists with the turnaround of clients in financial distress. We provide business support tobusiness partners to address specific deficiencies. Continuous training of the IDC’s Deal
Makers. Continuous monitoring of strategies to reduce impairments by Exco and the Board
Risk and Sustainability Committee.
Invest in co-generation at highly affected business partners and subsidiaries. Maintainown-generation capacity at the IDC’s offices in the event of electricity failures.

Strategies to deal with the impact of 4IR on industry and the IDC. Provide funding forbusinesses to implement and develop new technologies and business models. Dedicate
individuals in sector-focussed units whose functions include keeping abreast of newtechnological development in different industries.
Targeted recruitment, retention, and succession planning strategies, e.g. competitive
remuneration and total reward offering. Knowledge management programme to retain
corporate memory. Focus on employee education and training, as well as study assistancepackages for personal development. Measure and manage employee engagement levels.

Investing in
humancapitalThe Investment Monitoring Committee, Post-Investment Management Department andSubsidiaries and Significant Investments Department manage the risk.

Incentivise job creation in transactions through concessionary rates, greater emphasison activities in sectors that create more jobs and support for transactions in upstream
industries and infrastructure that will unlock job creating activities. Prioritise projects witha potential high impact on job creation.
Monitor risk through the regular analysis of economic, political and legal events, assess
potential implications and implement interventions.

Selected
performanceindicators

Board responsibility for the IDC’s strategy and continuous engagement with theshareholder representative about the IDC’s priorities. Strategy planning sessions
incorporate the Board and management.

Investment analyses and monitoring. The IDC’s diversification strategy, e.g. capital
allocation to sectors with low exposure. Track and forecast the portfolio against set targets.

Managed through culture transformation plans, change management plans and ongoing
employee engagement. Effective performance and consequence management andleadership capacitation to support culture transformation.

15

SELECTED PERFORMANCE INDICATORS
Performance targets are agreed with the shareholder on an annual basis. The complete list of indicators, targets, and performanceagainst these are included in the separate Annual Financial Statements publication. Below is an excerpt with the most important
indicators.
2020 projected
Indicator

Base

2019

TargetActualBase

Target2018

2017

ActualActualDevelopment impact
Value of funding disbursed (R’bn)

19.7

21.7

11.4 1

17.2

21.8

14.6 1

11.0

Funding to Black Industrialists (R’bn)

6.1

8.9

4.7

5.5

8.0

7.8

4.9

Funding to women-empowered businesses(R’bn)2

2.0

2.5

2.8

1.2

1.5

2.0

3.3

Funding to youth-empowered businesses(R’bn)2

1.0

1.5

0.7

0.8

1.0

1.0

1.7

Funding to support government localisation
initiatives (R’bn)2

6.1

7.0

4.7

4.7

5.4

7.0

4.8

32 50140 01517 88728 26234 79522 19320 155

Impairments as percentage of the portfolio at
cost (%)3

24.6

21.6

28.4

24.6

22.6

17.4

16.7

Net interest, dividends, fees and money market
income as a percentage of total assets (%)

4.8

5.3

4.5

4.5

5.0

5.3

4.1

Yield onlong-term
government
bonds

Yield onlong-term
government
bonds + 200
basis points

4.9

9.3

11.3

5.5

7.5

sefa – Performance rating as per its Balanced
Scorecard

3.0

5.0

3.3

3.0

5.0

3.3

3.2

Foskor – Operating profits/losses (R’m)

(263)

(234)

(184)

(392)

(349)

(763)

(902)

2

Expected direct jobs created and saved(number)2
Financial and efficiency indicators

Growth in reserves (%)

Subsidiaries

1

Disbursements to some subsidiaries are not taken into account when the indicator is measured for performance purposes.

2

Measured when agreements are signed. Information elsewhere in the report is as at the time when transactions are approved.

3

2019 targets and actuals and 2020 targets according to IFRS 9, previous years according to IAS 39.

16

MATERIAL MATTERS AND MATERIALITY
The IDC’s Integrated Report is structured around matters thatare viewed as material to its stakeholders. International reporting
frameworks and practices guide the process that we follow todetermine our material issues. The list is reviewed regularly toensure that it remains current and relevant.
A matter is considered material when it supports our mandate
and goals, and could potentially affect our ability to create andsustain value.
The process of determining materiality includes the deliberation
about a range of internal and external influences. We consider
the views of key stakeholders and significant risks that face theorganisation, while remaining mindful of the strategies and goals
that underpin our mandate.

In 2017, we followed a comprehensive process to determine andvalidate the material issues of the IDC. This year, a consultation
process endorsed the current list. Participants in a workshop
identified a variety of issues with a potential impact on thebusiness. During a follow-up survey, participants ranked theissues per impact and stakeholder concern. This, along withongoing engagements with stakeholders, validated the current
list of material issues.
The table below provides an explanation of the material issues.
The icons indicate how our material issues relate to the different
Sustainable Development Goals (SDGs).

Material matter

SDGs

Industrial development
The IDC is the key implementer of Governments’ industrial policy. Industrial development remains at the topof the list of material matters as it links directly to the IDC’s mandate. Efficient and effective use of resources
is critical for the Corporation to accomplish its mission and the consequences of economic and policy
uncertainty impact directly on the IDC’s purpose.
Socio-economic development
The IDC’s development outcomes are aligned with matters deemed critical at both national and global levels
and, as such, feature prominently in the National Development Plan (NDP) and Sustainable Development
Goals (SDGs). At the forefront of the IDC’s development outcomes is job creation. A large portion of corporate
and team performance indicators is weighted towards this outcome. Transformation is another priority
developmental outcome as this goal is central to addressing inequality. Since socio-economic development
affects our stakeholders directly and has a direct bearing on the natural environment, it is integral to the IDC’s
strategic pillars.
Customer expectations
The sustainability and growth of our organisation depend on our ability to remain relevant to and meet theneeds of our customers. We realise that efficient processes and systems are at the core of customer satisfaction
and require us to deliver the right products and the right time at the right price. We use customer satisfaction
surveys to track client requirements and guide the best use our available resources.
Human capital
Extraordinary leadership and decisive, informed decision-making are essential elements of a high-performanceorganisation. As such, significant resources are allocated to leadership and critical skills development. We strive
to provide market-related remuneration and benefits, and will continue to improve employee engagement andaddress issues affecting staff morale. Harnessing adequate and appropriate skills and innovating continuously
impacts directly on our ability to meet and exceed customer expectations.
Partners
Our ability to leverage funding underpins our capacity to increase industrial development in the country. Our
business partners trust us and we remain a stable partner for our associates and subsidiaries. We collaborate
with other state-owned enterprises, organisations and institutions to drive economic stimulus package
initiatives. We address policy issues, such as B-BBEE, through the South African DFI initiative and combine ourresources for research efforts. Government departments such as the dti are engaged on relevant policies suchas IPAP.
Governance, regulation and risk management
The IDC prides itself as an organisation with exceptional corporate governance structures and practices andfiercely protects its reputation in this regard. We are committed to the King IV Codes and comply with the
PFMA provisions for Schedule 2 entities. We update our policies, systems and procedures continuously toremain aligned with the latest developments and ensure that we limit our vulnerability to unethical businesspractices. We adopted the IFRS 9 framework for classifying and measuring financial assets and liabilities.
Financial sustainability
Financial sustainability remains a priority and we are frequently revisiting our business model to remain flexible
to changes in the environment. The financial performance of our partners and subsidiaries has a direct impact
on our own financial sustainability and we remain actively involved where we have an influence. Impairments
continue to be an area of concern in the current economic climate.

17

OUR STRATEGYSUSTAIN HUMAN SOCIAL AND
NATURAL CAPITALINCREASE INDUSTRIAL DEVELOPMENT

HUMAN CAPITAL

Be proactive and strategic in developing priority
industries

Attract and retain the right skills

Align our funding activities with Government’s
economic, industrial and infrastructure policies

Reward and recognise our people

Enhance skills and leadership capacity

Integrate industries across the continent

Facilitate an environment thatenables a diversified workforce

Address the needs of SMMEs particularly throughintermediary finance partnerships such as sefa

Promote employee engagement andcommitment

STAKEHOLDERS
Improve customer service
Leverage other financiers
Identify industry
development opportunities
through broader sectoral
engagement
Develop Black Industrialists
and increase funding
to women and youth
entrepreneurs
Contribute to policy
development

MAINTAIN FINANCIAL
STABILITY

Build strong communities
around IDC-funded projects

Manage concentration risk in our portfolio
Diversify income sources in our portfolio

NATURAL ENVIRONMENT

Improve portfolio management

Improve IDC’s and industry’s
environmental sustainability

UTILISATION OF RESOURCES
Enhance efficiencies

Our strategic focus is on industrial capacity development thatmaximises our development impact and ensures the long-termsustainability of the Corporation. We do this by supporting jobs-richindustrialisation and competitiveness improvements, addressing
issues related to our financial and human capital, stakeholders andthe natural environment, and by increasing the efficient use ofresources.

Diverse inputs into the IDC’s strategy review process resultin annual priorities being identified

Our strategy development is a continuous and formally- reviewed
process. These reviews consider changes in the operating
environment and are guided by robust discussions between the
Shareholder Representative, Board, Executive Management andsenior managers and engagement with staff. We develop customised
strategies for industries and functional areas with input from sectorspecific experts within the Corporation. Details of the aspects of ourLeadership in Industrial Development strategy are illustrated in the
diagram above.
As part of our strategic review process, our stakeholder needs,
operating environment changes, mandate, material issues andcurrent strategy are considered to identify specific focus areas for theupcoming period. Focus areas can change or remain the same fromyear-to-year depending on the issues that need to be addressed orother priorities that may have arisen. Our focus areas for 2019 wereto:• Increase industrial development• Capitalise on opportunities in the rest of Africa• Gear up for the Fourth Industrial Revolution• Maintain financial sustainability• Establish a high-performance organisation.

18

The needs andpriorities of our
stakeholders1

OurmandateChanges inour operating
environment2

Material Matters3
Strategy
Key Focus Areas
1
2
3

See page 12.
See Chairperson’s and CEO’s statements (page 6 and page 26).
See page 17.

OUR DEVELOPMENT OUTCOMES AND THEIR CONTRIBUTION TO SDGs,
THE NDP AND THE NGPThe IDC’s funding is directed at increasing investment in industrial sectors. Our investments are aimed at expanding capacity inproductive sectors, enhancing value-addition to raw materials, improving the competitiveness of industries, increasing exports andimport replacement, and integrating value chains across the continent. In this way, the IDC’s investments and resulting industry
enhancements support the development outcomes that address South Africa’s socio-economic challenges.
Theme

IDC development
outcomes

Economic

Sustainable Development
Goals addressed directly
through development
outcomes

Priority areas in the
National Development
Plan addressed directly
through development
outcomes

Priority areas in the New
Growth Path addressed
directly throughdevelopment outcomes•	Objective: Leadindustrial capacity
development•	
Facilitation of decent andsustainable direct andindirect jobs
•	Promotion ofentrepreneurship and SME
development (including
through sefa)•	
Increased sector diversity
and localised production•	
Economy andemployment (Chapter 3)•	Economic infrastructure(Chapter 4)• Jobs drivers•	
Development Policy –Enterprise development

Social andequality•	
Development of Black
Industrialists and support
for women and youth
entrepreneurs•	Support community
transformation•	
Increased development inpoorer areas and higher
integration of regional
economies•	
Economy andemployment (Chapter 3)•	Inclusive rural economy(Chapter 6)•	South Africa in the world(Chapter 7)•	Transforming society
and uniting the country(Chapter 15)•	
Development policy–Broad-based Black
Economic Empowerment•	
Jobs drivers – Spatial
development•	
Development policy – Rural
development•	
Development policy– Policies for African
development – Policies for
African development

Environment•	Advancement ofenvironmentally
sustainable growth•	Environmental
sustainability andresilience (Chapter 5)•	Jobs drivers – Greeneconomy19

OPERATIONAL STRUCTURE
The Corporation consists of 11 divisions, each headed by a
Divisional Executive who reports to the Chief Executive Officer.
Four of the 11 divisions are engaged solely in transactions andproject development. These divisions consist of individual units
that focus on specific value chains and industries. Each unit
handles applications and projects for a specific industry to foster
specialisation and industry expertise.

•••

Research and strategy formulation
Support for targeted groups of entrepreneurs
Credit risk assessments.

Four transaction support and middle office divisions assist theoperational divisions in terms of:• The legal aspects of transactions• Post-investment and business turnaround

Finally, three divisions provide administrative support related tofinance and funding, corporate affairs and human capital. Theinternal audit unit reports operationally to the CEO.

These four divisions also perform corporate support functions,such as compliance monitoring, secretarial and IT services andoperational risk management.

Chief Executive Officer

Front Office

SupportMining, New& RelatedIndustries

Agro,
Infrastructure& Automotive

Chemical& Textiles
Industries

High Impact &Regions

Finance &Funding

Corporate
Affairs

Human
Capital

Basic Metals andMiningAgro-processing
and Agriculture

Basic and Specialty
Chemicals

Media and Audio
VisualCorporate
Funding

HC Business
Partners

Machinery andEquipment

Industrial
Infrastructure

Chemical
Products andPharmaceuticals

Heavy
Manufacturing

Corporate
TreasuryCorporate
Communications andMarketing

New Industries

Automotive
and Transport
Equipment

Light
Manufacturing
and Tourism

Financial
Management

Clothing and
TextilesProcurement
Rest of Africa
SupportOperations Head
Office and Regions

Development
Funds

Customer
Relations Management
Facilities
Management
Corporate
SocialInvestment

TalentManagement
andOrganisational
EffectivenessTotal Rewards
and Shared
Services
Learning andDevelopment

Transaction Support & Middle Office
Legal,
Governance &Turnaround

Subsidiaries& PostInvestment

Corporate Risk

Legal Services

Post Investment
Management

Risk Management
and ALM

Subsidiaries
and Significant
Investments

Environmental
Health and Safety

Workout andRestructuring
Compliance andRegulatory Affairs
Corporate
Secretariat andRecords

Corporate
Strategy
Corporate Strategy
Research andInformation

Fixed Asset
Valuations

Innovation andContinuous
Improvement

Information
Technology

Developmental
Impact Support
PICC

20

Internal
Audit

CASE STUDYGQ TISSUE PRODUCTS

V E R T I C A L I N T E G R AT I O N T O R E P L A C E
IMPORTS

GQ Tissue Products is a manufacturer of high quality tissue products
at its factory in Sutherland Ridge, Pretoria. The company used toimport raw materials but management identified long lead-times toreceive orders as a high risk.
“We used the IDC funding to buy machinery and equipment, which
helped us to stop importing materials. We now buy our raw materials
from KwaZulu-Natal and then use our own machinery to process thematerials into tissues. Before this, we used to wait two months forimported materials to arrive,” said Ridwaan Lakhana, the company’s
Managing Director. The new machinery also opened an opportunity
to empower and transfer skills to employees.
“We have 140 employees and there are some of them who havebeen with the company for sixteen years,” Lakhana added. In orderto accommodate the new equipment, the company moved to newpremises. The additional space allows the company to expand into a
more comprehensive range of consumer tissue products.

DEVELOPMENT I M P A C T
 33 jobs created

The company currently produces a wide range of one- and two-ply
coloured serviettes and exports to several countries in Africa. Overthe one and a half decades of the company’s existence, it has built
up a broad-spectrum customer base, consisting of chain stores,
pharmacy groups, independent wholesalers and retailers, contract
cleaning suppliers, and catering industry suppliers.

21

2019 PERFORMANCE TRENDS

22

1
2

Metals and mining value chain (R5 117m)

Metals and mining value chain (50)

Agro-processing and agriculture value chain (R1 047m)

Agro-processing and agriculture value chain (24)Chemicals and pharmaceuticals value chain (R3 100m)

Chemicals and pharmaceuticals value chain (32)Industrial infrastructure (R523m)

Industrial infrastructure (6)Clothing, textiles, leather and footwear (R977m)

Clothing, textiles, leather and footwear (17)New industries (R544m)

New industries (18)Other manufacturing and related industries (R579m)

Other manufacturing and related industries (29)Media, tourism, ICT and related industries (R 1 186m)

Media, tourism, ICT and related industries (15)

Eastern Cape (R1 741m)

Free State (-R53m1)

Eastern Cape (1 134)

Free State (-1931)

Gauteng (R2 767m)

KwaZulu-Natal (R2 646m)

Gauteng (6 371)

KwaZulu-Natal (6 316)

Limpopo (R921m)

Mpumalanga (R679m)

Limpopo (3 019)

Mpumalanga (769)North West (R126m)

Northern Cape (R1 916m)

North West (415)Northern Cape (518)Western Cape (R1 404m)

Rest of Africa (R925m)

Western Cape (739)

Negative values as a result of cancellations of transactions approved in previous years.
Not including sefa.

23

OUR BOARD OF DIRECTORSBA MABUZA (55)

TP NCHOCHO (51)

MG QHENA (53)

Chairperson of the Board

Chief Executive Officer

Chief Executive Officer

LI BETHLEHEM (51)(Non-Executive Director)(Executive Director)(Executive Director)

MBA (Finance and Information
Systems) (Leonard Stern School ofBusiness, New York University, USA),
BA (Mathematics and Computer
Science) (Hunter College, City
University of New York, USA)MSc (Development Finance andEconomics) (University of London),
MBL (UNISA), BCom (University of
the North), AMP (Harvard Business
School)BCompt (Hons) (UNISA), CA(SA), SEP(Wits and Harvard), Advanced Tax
Certificate (UNISA)

MA (Wits), BA (Hons) (Industrial
Sociology) (Wits), Certificate inEconomics and Public Finance(UNISA)

Resigned from the Board on
31 December 2018

Appointed to the Board on
1 October 2008

(Non-Executive Director)

Appointed to the Board on
25 November 2011 and appointed
Chairperson on 29 January 2015

Appointed to the Board on
1 January 2019

Committees:•	Chairperson of the Board Risk andSustainability Committee

Committees:•	Member of the Board Human
Capital and Nominations
Committee•	Member of the Board Investment
Committee

BA DAMES (53)

RM GODSELL (66)A KRIEL (56)(Non-Executive Director)(Non-Executive Director)(Non-Executive Director)

MBA (Samford University, USA), BSc(Hons) (UWC)

MA (Liberal Ethics) (UCT),
Postgraduate studies (Sociology
and Philosophy) (Leiden University,
Netherlands), BA (Sociology andPhilosophy) (UKZN)

BSoc Sci (UCT)SM MAGWENTSHU-RENSBURG(59)(Non-Executive Director)

Appointed to the Board on
25 November 2011
Committees:•	Chairperson of the Board Human
Capital and Nominations Committee•	Member of the Board Risk andSustainability Committee

24

Appointed to the Board on
25 November 2011
Committees:•	Member of the Board Human
Capital and Nominations
Committee•	Member of the Board Audit
Committee

Appointed to the Board on
1 April 2016
Committees:•	Member of the Board Human Capital and Nominations Committee•	Member of the Board Risk andSustainability Committee•	Member of the Board Social andEthics Committee

DPhil (Business Management) (UJ),
MBA (Webster University, London),BA (Management Accounting andBusiness Administration) (Webster
University, Vienna)
Appointed to the Board on
25 November 2011
Committees:•	Chairperson of the Board
Investment Committee•	Member of the Board Audit
Committee

NP MNXASANA (62)

M MORE (38)

PM MTHETHWA (55)ND ORLEYN (63)(Non-Executive Director)(Non-Executive Director)(Non-Executive Director)(Non-Executive Director)

CA(SA), BCompt (Hons) (UNISA)CA(SA), CTA (UKZN), BBus Sc (FinHons CA option) (UCT), BCom
(Accounting Hons) (UKZN)MBA (Corporate Finance) (Universityof Sheffield, England), MSc (Economics) (University of Paris, France), BA(Economics) (University of Limpopo)

LLB (UNISA), BProc (UNISA), BIuris(UFH), Certificate in Energy Law,
Executive Management Programme(Kellogg Business School, USA)

Appointed to the Board on 25
November 2011

Appointed to the Board on 29
January 2015

Committees:•	Member of the Board Investment
Committee•	Member of the Board Risk andSustainability Committee

Committees:•	Chairperson of the Board Socialand Ethics Committee•	Member of the Board Investment
Committee•	Member of the Board Human
Capital and Nominations
Committee

Appointed to the Board on
29 January 2015
Committees:•	Chairperson of the Board Audit
Committee•	Member of the Board Risk andSustainability Committee

Appointed to the Board on 1 April
2016
Committees:•	Member of the Board Audit
Committee•	Member of the Board Social andEthics Committee

Board Demographics*

NE ZALK (50)

GS GOUWS (60)(Non-Executive Director)(Alternate Director to CEO)PhD (Economics), MSc (Economics)(with merit), Postgraduate Diploma in
Economics (Development) (School ofOriental and African Studies, London
University), BA (English and Private
Law) (UNISA)

BCom (Law), BCom (Hons) (RAU,
now UJ), CA(SA), FCMA, Advanced
Management Programme (Insead)
Resigned from the Board on
31 March 2019

7 - Female

8 - Black4 - Male

3 - White*Non-executive directors

Appointed to the Board on 25
November 2011
Committees:•	Member of the Board Investment
Committee•	Member of the Board Social andEthics Committee

25Chief Executive
Officer’sStatement
Operating environment
Over the past years, the IDC’s contribution to the expansion andinclusivity of the domestic economy has been significant. In
particular, the IDC has played a countercyclical investment role fora decade in a relatively weak economic environment, supporting
industrial capacity development where opportunities exist andpreventing deindustrialisation by preserving enterprises that,
although experiencing financial difficulties, could demonstrateviable business cases.
A difficult economic environment over the past financial year resulted
in some of our financing and developmental outcomes falling shortof the levels achieved over the past few years. Challenging trading
and operating conditions in key sectors such as manufacturing andmining, which are crucial for the IDC in terms of our developmental
mandate, in the main accounted for much of the deceleration in the
Corporation’s financing activity.
Weak domestic demand and difficult conditions in the global trading
arena, significantly due to US-led protectionism and trade tensions,alongside rising input cost pressures, interruptions in electricity
supply and, among other factors, policy uncertainty, contributed
to generally low business and investor confidence and had adverse
impacts on investment spending in key sectors of the economy. Insuch an environment, many of the Corporation’s business partners
seem to have put their investment projects on hold, slowing down
their borrowing plans.
Nevertheless, our deliberate focus on initiatives aimed at ensuringthat our objectives of transformation and economic inclusivity areproactively pursued, including funding for women-empowered
enterprises, continued to show positive results.

Delivery on our strategies
The IDC has a well conceptualised strategy that seeks to enhance
impact by focusing its financing efforts in industries where it
can drive industrial development and garner the highest socioeconomic development returns.
The momentum that the IDC built up over the last couple of years
which saw the Corporation increasing levels of funding approvals,

26

disbursements, and job creation, among other development impact
indicators, slowed slightly in 2019. During the reporting period,
the IDC approved R13.1 billion in funding (2018: R16.7 billion) anddisbursed R11.8 billion (2018: R15.4 billion). The funding approved
is expected to create and save 19 178 jobs (2018: 29 885) as theinvestments are executed.
Funding to the agro-processing and agriculture value chain, thechemicals and pharmaceuticals value chain, the clothing, textiles,
leather and footwear industries, as well as to new industries and some
services sectors, witnessed promising growth. Some of these results
were achieved on the back of deliberate strategies that the IDC has
been pursuing over the past few years. These strategies include anincreased focus on investing in labour-intensive sectors, particularly
agriculture and agro-processing, leveraging on managed funds andby participating in early-stage project development.
However, the metals and mining value chain, particularly new mining
investment, industrial infrastructure, and other manufacturingindustries saw reductions in their levels of funding. Investment
in some of these industries is typically of a large, capital-intensive
nature and, as such, it is not surprising that increased funding toindustries where investments are generally of a smaller size could
not compensate for this.
The IDC continued to be resolute in driving inclusive economic
development as shown by several indicators. An amount of
R6.0 billion or 46% of the total funding approved was for Black
Industrialists during the period under review (2018: R7.9 billion;47%), Taking the total amount approved for Black Industrialists overthe past four years to R21.4 billion, or 93% of five-year target of R23
billion set in the 2016 financial year. The R4.5 billion five-year target
set for the funding of women entrepreneurs was already exceededin 2018, and an additional R3.0 billion was approved in 2019.
Similarly, against the five-year target of R4.5 billion set in 2016 for thefinancing of youth entrepreneurs, the R823 million approved in 2019
resulted in this target also having now been achieved.
On 21 September 2018, President Ramaphosa announced a stimulus
and recovery plan aimed at increasing economic activity andcreating jobs. The IDC’s contribution to the plan includes increasinglevels of funding, fast-tracking the development and funding of
projects, exploring cooperation with private banks to stimulate
business funding, and other initiatives targeted at specific sectors. By
the sign-off of this report the IDC had approved R14 billion of its key
commitment to the plan, the approval of R20 billion of transactions
from the date of the announcement of the plan. Progress in projects
includes the development of tourism projects and developmentof funding schemes aimed at specific sectors and distressedcompanies. Collaboration with Transnet on localisation initiatives isan additional opportunity that demonstrates the commitment to an‘SA Inc’ that results in industrialisation opportunities.

Financial performance
The implementation of IFRS 9 was by far the principal driver ofvariations in the IDC’s financial performance in the reporting period,
relative to previous financial years. The implementation of this new
standard resulted in increased impairment provisions and a higher
impairment ratio compared to prior years.
Total assets for the group grew by 5.5% to R144.6 billion (2018:
R137.0 billion) , mainly driven by disbursements as new assets wereacquired and by a R9 billion increase in the overall value of listed
investments, largely due our shareholdings in Sasol (JSE: SOL)
and Kumba Iron Ore (JSE: KIO). In line with our funding plan, we
increased our borrowings to support funding activities, resulting in
the debt-to-equity ratio increasing to 41.4% (2018: 36.1%).
In the period under review, the company’s revenue increased from
R6.6 billion in 2018 to R8.4 billion, largely due to a significant increasein our dividend income, especially in counters such as Kumba Iron
Ore, BHP and Palabora Mining Company.

Progress with turning around subsidiaries
The Scaw corporatisation process was completed during the financial
year, with the Cast South Africa (Cast SA) and Grinding Media South
Africa (GMSA) divisions having been carved out into separate legal
entities, and strategic equity partners introduced to provide thenecessary financial and technical support to the respective divisions.
GMSA was able to report a small profit for the financial year and we
expect to see improved performance from Scaw and Cast SA in thenext financial year.
Foskor’s performance was better than expected, but still not at adesirable level. The Board of the IDC appointed a sub-committee
to look closely at the affairs of Foskor during the financial year
under review, in partnership with the Foskor Board. Its proposals
are expected to improve both the operational and financial
performances of Foskor during the next financial year.

Looking ahead

employees, and sound corporate governance. Opportunities
still exist to strengthen its role in leading industrial capacity
development while reinforcing its financial sustainability. The focus
over the forthcoming period will be on deepening development
impact, securing financial sustainability, improving customer service
and enhancing the engagement levels of our employees.
Development impact: We will sharpen our delivery model bystrengthening our development planning capabilities to play a morestrategic role in industry development.
Financial sustainability: The primary focus will be on enhancing
earnings, as well as on managing impairments and non-performing
loans. We will thus place more emphasis on making better
investment and credit decisions, and increasing our proactive
approach to managing our portfolio.
Customer service: Our clients remain the core of what we do and, assuch, we will be launching several initiatives to drive operational
efficiencies and recommit to our customer service ethos, in order for
us to deliver better service.
Culture: Our recent culture surveys and feedback have indicated low
levels of staff morale and engagement. This is attributable to several
factors that the management and Board are addressing decisively.
Looking ahead, we will be deliberate in attracting, developing
and retaining highly talented individuals in pursuit of our strategic
objectives.
Leadership: Over the past 18 months, the IDC has seen the exit of four
executives, including my predecessor, Mr. MG Qhena. I would liketo thank them for their long service to the IDC and for the support
provided to me during my transitioning period. I am very comfortablethat the leadership changes are being managed effectively, ensuringcontinuity and reinvigoration of the IDC.

Acknowledgement
I would like to take this opportunity to thank the staff, management
and Board of the IDC, as well as all pertinent stakeholders for having
made my transition into the Corporation seamless. I look forward toworking with all stakeholders as we frame an agenda for the future.

TP Nchocho
Chief Executive Officer

29 July 2019

The IDC has several strengths to build on, including a solid financial
standing, strong brand equity, highly qualified and dedicated27

OUR EXECUTIVE MANAGEMENT TEAMTP NCHOCHO (51)

MG QHENA (53)N DLAMINI (45)

MP MAINGANYA (46)

Chief Executive Officer
Appointed on 1 January 2019

Chief Executive Officer
Resigned 31 December 2018

MSc (Development Finance andEconomics) (University of London),
MBL (UNISA), BCom (University of
the North), AMP (Harvard Business
School)BCompt (Hons) (UNISA), CA(SA), SEP(Wits and Harvard), Advanced Tax
Certificate (UNISA)

Chief Financial Officer
CA(SA), BCom (Accounting) (Wits),
Post Graduate Diploma in Accounting(UKZN)

Chief Risk Officer
CA(SA), BCom (Wits), BAcc (Wits),
HDip Tax Law (RAU, now UJ), Adv.
Cert. Banking (UJ), IEDP (Wits), GEDP
(GIBS)RJ GAVENI (47)

GS GOUWS (60)P MAKWANE (53)

TL KHUMALO (39)Divisional Executive: Human
CapitalContract ended on 31 May 2019

Divisional Executive: Mining, New
and Related Industries
Retired on 31 March 2019

General Counsel and Group
Company Secretary

Divisional Executive: Subsidiaries
and Post-Investment
Appointed on 1 September 2018

MSc (HR Management) (Golden
Gate University, USA), BAdmin (Hons)(Industrial Psychology) (UNISA),
Executive Development Programme(GIBS)CA(SA), BCom (Hons) (RAU, now UJ),
BCom (Law) (RAU, now UJ), FCMA,
Advanced Management Programme(Insead)

LLB (UWC), BJuris (UWC)

28

BSc (Electrical Engineering) (Wits),
MBA (UCT)PZ LUTHULI (42)DA JARVIS (49)

AP MALINGA (54)

L MATSHEKGA (45)Divisional Executive: Corporate
Affairs
MBA (UNISA), BA Communications(University of Zululand)

Divisional Executive: Corporate
Strategy
MSoc Sci (UKZN), BSoc Sci (Hons),(UKZN), BSoc Sci (UKZN)

Divisional Executive: Mining andMetals Industries
Offboarded on 31 December 2018

Divisional Executive: Agro,Infrastructure and Automotive
MPhil (Development Finance) (USB),
BCom (Hons) (Financial Analysis andPortfolio Management) (UCT), BCom
(General) (UWC), Global Executive
Development Programme (GIBS

MBL (UNISA), BSc (Geology) (UCT)

Executive Management Demographics

SAU MEER (57)

WH SMITH (58)Divisional Executive: Chemicals
and Textiles Industries
MBL (UNISA), BSc (Mechanical Engineering) (UKZN), Advanced Management Programme (Insead), Executive
Development Programme (GIBS)

Divisional Executive: High Impact
and Regions
BEng (Civil), GDE (Civil) (Wits), Pr Eng(Stellenbosch University)
4 - Female

8 - Black6 - Male

2 - White

29

LEADING INDUSTRIAL CAPACITY DEVELOPMENTMETALS AND MINING VALUE CHAINOPPORTUNITIESINDUSTRY-SPECIFIC RISKS AND
CHALLENGES

FOCUS AREA
MINING• Energy minerals – supply ofcoal for electricity generation;
supply of minerals used forbatteries• PGMs – reduce cost of production for platinum production;
stimulate demand for PGMs

MACHINERY AND EQUIPMENT• Manufacture of power generation, transmission and distribution equipment (including
renewable energy)• Manufacture of mining andquarrying equipment• Manufacture of bulk handlingand heavy lifting equipment• Manufacture of water, oil andgas storage, handling and distribution equipment• Low levels of economic growthBASIC METALS• Ferrochrome – increase capacity and improve downstream
competitiveness; increase capacity to produce coking coaland anthracite• Iron and steel – increase
capacity of mini mills; develop low-cost alternatives toferrous scrap; improve competitiveness of existing steel
producers• Non-ferrous metals – develop
zinc beneficiation capacity;
identify opportunities for copper and cobalt

FABRICATED METALS• Production of metal products
such as coil, pipes, tubes, rods,
wire and cables, includingaluminium body sheets andaluminium rods

MOTOR VEHICLES, PARTS
AND ACCESSORIES• Increase capacity to manufacture and assemble vehicles• Manufacture of automotive
parts and components, including parts for electric vehicles

OTHER TRANSPORTEQUIPMENT• Manufacture or assembly ofrail and rolling stock, as well as
parts and components• Develop new capacity for shipbuilding and repair• Increase the production ofaerospace components forexports with a focus on introducing 4IR technologies• Support to the MHCV sector,
locally and on the African
continent• Develop motorbikes and bicycles manufacturing capacity

•

•
•
•

•

•

with tentative recoveries inmining and manufacturing
Long-term declining trend in
productivity growth in the local
mining industry
Commodity price and exchange
rate volatility
Global trade conflicts impact
export markets negatively
Impact of coal mining
for electricity generation
greenhouse gas emissions
Infrastructure, including
increasing electricity costs
and unreliability of supply andtransport infrastructure
Delays due to financial
challenges at SOEs lead to delaysin the roll-out of infrastructure
projects with a negative impact
on the demand for electricalmachinery and transport
equipment

INDUSTRY-SPECIFICSTAKEHOLDER AND STRATEGICENGAGEMENTS• Economic Development

Department• D epartment of Mineral Resources• Participation in Steel Industry

Task Team• Eskom, Transnet, PRASA and

INDUSTRY RESEARCH COMPLETED• A strategic analysis of the platinum group metals value chain (2019)• A strategic analysis of the zinc value chain, market analysis and market outlook and potential implica•
•
•
•
•
•
•
•
•
•
•
•
•
•
•

tions for South Africa (2019)
Realising the development potential of the regional copper-cobalt value chains (2019)
South Africa within the global aerospace industry landscape (2019)
South Africa’s mining equipment value chain in the context of the Mining Charter (2019)
South Africa’s railway equipment industry value chain (2019)
The electric vehicles value chain (2019)
The coal value chain in South Africa and assessment of potential coal ash utilisation routes (2018)
Bus manufacturing value chain analysis and strategic assessment of alternative-fuelled technology(2018)
Projections of the potential energy storage capacity roll-out in Sub-Saharan Africa (2018)
Attraction of a yellow metal original equipment manufacturer to South Africa (2017)
Global uranium market and strategic value chain analysis (2017)
Global vanadium value chain analysis and strategic assessment of redox flow battery technology (2017)
South Africa’s automotive components value chain (2017)
South Africa’s shipbuilding value chain – a strategic perspective (2017)
An analysis of the South African gas cylinder value chain (2016)
South Africa’s chrome value chain – a strategic perspective (2016)

30

•
•
•
•

•

Rand Water (as purchasers ofmachinery and equipment)Department of Trade andIndustry
CSIR and other research
institutions
Automotive OEMs
Industry bodies (e.g. SEIFSA, SAISI,NAAMSA, NAACAM, VAMCOSA,
AMD and CAMASA)
Organised labour (e.g. NUM,NUMSA)PROJECTS UNDER DEVELOPMENT
•
•
•
•
•

Energy-efficient chrome smelter
Coking coal
Tin mine
Tantalum mine
Mine-shaft boring equipment

•
•
•
•

Battery storage equipment
Forged train wheels
Green ship-recycling facility
Electric drive motors

31

METALS AND MINING VALUE CHAIN
This value chain includes mining and the manufacturing of basic
metals, metal products, machinery, motor vehicles and components,
as well as other transport equipment.

Sector trends

South Africa’s mining sector continued to experience a difficult
operating environment in the 2018 calendar year, despite theimproved prospects for bulk commodity producers, especially coaland manganese miners. Gold and platinum prices encountereddownward pressure, although prices trended upwards in otherplatinum group metals.
The basic iron and steel industry (+3.0% growth) and motor vehicles,
parts and accessories industry (+6.6%) are large manufacturing subsectors that recorded higher volumes of production, while outputof the machinery and equipment sub-sector declined marginally(-0.4%).
Motor vehicles, parts and accessories remain the single largest
manufactured export category, representing 23.5% of total
manufacturing exports. The value of exports increased by 9.3%
in 2018, backed by an increase in the number of motor vehicles
exported to Europe and other African markets. These recorded
fewer deliveries to the US market.
Higher international prices and a recovering global market
assisted growth in basic iron and steel exports, the second largest
manufactured export category, by 4.3% in 2018. Increased demand
from Asia, East and West Africa helped South African steel producers
to expand their export sales.
Employment levels declined in the basic non-ferrous metals (-3.6%),
electrical machinery and equipment (-2.3%), basic iron and steel(-5.6%) and metal products (-1.7%) sub-sectors in 2018. In contrast,
the following industries recorded employment gains over year to
the fourth quarter of 2018: machinery and equipment (+2.9%); motor
vehicles, parts and accessories (+0.3%); and transport equipment(+4.8%).

OUR APPROACH
We aim to grow a globally competitive metals industry byintervening directly in downstream industries and developing basic
metals industries that can supply price-competitive inputs to thedownstream sectors.
The mining industry, as a key supplier of raw materials to the metals
and other downstream industries throughout the economy, remains
an important employment provider. As such, this upstream industry
remains important in the value chain’s strategies.

FUNDING ACTIVITY
In the year under review, high funding levels for sub-sectors in thevalue chain could not be sustained and decreased overall by 42%
to R5.1 billion (2018: R8.8 billion). Apart from funding for machineryand equipment, which showed a R65 million increase, funding for32

other sub-sectors declined. The largest impact resulted from the
55% (-R1.7 billion) reduced funding for the mining industry. While
disbursements increased in some sub-sectors on the back ofprevious years’ approvals, the trend overall was similar to that of
approvals.
The bulk of funding approved for the mining industry was forcontinued support to the Kalagadi Manganese project in the
Northern Cape. We also supported the development of an anthracite
mine in Mpumalanga.
Our support for developing Black Industrialists in the automotive
sector included additional funding for a bus manufacturer inGauteng to supply buses for the Gautrain network. Although partsof the BAIC automobile plant, such as the paint shop are still underconstruction, the assembly of semi knocked-down vehicles started
in 2019, with plans to start building completely knocked-down carsin 2020.
The restructuring and unbundling of Scaw into separate entities
during the past year saw the introduction of strategic equity partners
into Scaw South Africa and Grinding Media. The IDC now holds 26%
of Scaw South Africa (Pty) Ltd, 59% of Grinding Media (Pty) Ltd and100% of Cast Products (Pty) Ltd. The restructuring is showing somesuccess with Grinding Media recording a profit for the year.

STAKEHOLDER ENGAGEMENTThe IDC engages with government, organised labour and the private
sector to align stakeholder interests with value chain development
on an ongoing basis. During the year, we engaged with stakeholders
on topics such as the Mining Charter, the draft Integrated Resource
Plan and the new Automotive Master Plan (APDP Phase 2).
The IDC continues to manage the Downstream Steel Industry
Competitiveness Fund on behalf of EDD. As at 31 March 2019, fundutilisation stood at R12.3 million of the total R95 million fund.

DEVELOPMENT OUTCOMES
Transactions approved during the year are expected to create 5 101
jobs (2018: 10 654) and save 964 jobs (2018: 2 778). The lower impact
can be ascribed in part to the approval of fewer new mining projects.
The overall reduction in the value of approvals was also due to lower
levels of funding to Black Industrialists, with R3.5 billion approved
compared to R4.2 billion in 2018. Funding for women entrepreneurs
increased to R1.7 billion on the back of continued support for the
Kalagadi Manganese project.

OUTLOOK
The newly gazetted Mining Charter has created greater policy
certainty and improved the outlook for the domestic mining sector.
Business confidence surveys by the BER, however, point towards
continued caution in the manufacturing sub-sectors.

CASE STUDYBU K ABOPA H O L DINGSASSISTING A BLACK INDUSTRIALISTTO SUCCEED IN THE
M A N U FA C T U R I N G I N D U S T R Y

Bukabopa is a tale of entrepreneurial perseverance and Black
Industrialist success. The company is one of a few black-owned
engineering factories that manufacture steel components to build
locomotives and buses. Established in 2013 by Black Industrialist
couple, Palello and Busi Lebaka, the engineering company uses raw
materials to manufacture and process steel structures to assemble
large vehicles.
The company currently manufactures components for MAN, a wellknown global truck and bus company. The company’s 161-strong
workforce comprises mostly of steel technicians, engineers, welders
and artisans. The company is Volkswagen Global accredited as atrusted manufacturer and also supplies components to transportcompany IVECO.
“We are barely a year into full operations because most of thework started only after the IDC provided us with funding in 2018,”
said Palello Lebaka. With 24 years’ experience in rail engineering
management, his sector knowledge is vital for the success of thebusiness.

DE V ELOPMENT IMPAC T
 161 jobs saved

Bukabopa used the IDC funding to purchase the land and businesspremises where it currently operates from previous owners who weregoing out of business. “In addition, the IDC funding helped us to kickstart our operations and have our machinery working,” Lebaka said.
The business is situated in Bapsfontein, outside Benoni in Gauteng.

33

LEADING INDUSTRIAL CAPACITY DEVELOPMENT

AGRO-PROCESSING AND
AGRICULTURE VALUE CHAINOPPORTUNITIESINDUSTRY-SPECIFIC RISKS AND
CHALLENGES

FOCUS AREA
FIELD CROP PROCESSING• Increase production capacity
and improve productivity• Invest in downstream foodprocessing• Develop smallholder
producers; infrastructure
investment; ownershiptransfer; partnerships between
producers and intermediaries/
wholesalers• Improve preservation andpacking technologies• Lower input costs• Develop opportunities formore advanced processing(e.g. ready-to-eat cooked
meals)HORTICULTURE• Link new processing capacity
to new crops• E xpand upstream production
where spare processing
capacity exists• Use under-utilised community
land through partnerships• Develop smallholder
producers: funding to raiseyields and quality; ownershiptransfer of primary agriculture
and processing; partnerships
between producers andintermediaries/wholesalers• Assist research anddevelopment to retain
superior genetic material• Support implementation of
new technologies, including
4IR (e.g. improved preservationand packing technologies,
drone technology)• Develop opportunities formore advanced processing

AQUACULTURE
Develop emerging industries:
E xpand exports, build on successful abalone export industry
Develop and establish viable finfish aquaculture operations
Increase production to replace harvesting from the wildImprove competitiveness by lowering feed costs and improving
efficiencies• Supplement supply from natural fishing resources throughaquaculture-based production• Improve efficiencies and lower input costs• Process downstream for value addition• Develop local feed supply capacity• Develop opportunities for more advanced processing
•
•
•
•
•

MEAT AND DAIRYPRODUCTS•	Introduce new technologies
in old meat processing
infrastructure•	Introduce new preservationand packaging technologies•	Reduce feed costs•	Integrate rural cattle herds into
the value chain•	Import replacement of poultry
and other products•	Invest in feedlots to deal withexcess capacity at abattoirs•	Develop opportunities formore advanced processing

FORESTRY• E xpand Eastern Cape forestry
sector• Improve productivity of theState-controlled forestry assets• Reduce cost of raw materials
and increase availability• Support sector transformationand inclusivity• Support smallholder timbergrowers

INDUSTRY RESEARCH COMPLETED••••South Africa’s biotechnology industry landscape in the context of the 4th Industrial Revolution (2019)
Chocolate confectionary in South Africa and investment opportunities (2018)
An analysis of South Africa’s citrus value chain (2016)
Rural beef integration – A study on the potential product development for the commercialisation andvalue add to beef production (2018).

34•	Extreme weather ranging fromdroughts to floods with extreme
temperatures and hailstorms•	Emerging pests and diseases•	Security of supply of raw
materials for processors•	Policy and regulatory risks –policy uncertainty in production
and marketing environments, e.g.
land redistribution, food safety,
water rights, environmental

INDUSTRY-SPECIFICSTAKEHOLDER AND STRATEGICENGAGEMENTS•	Economic Development
Department•	Department of Agriculture,
Forestry and Fishing•	Department of Rural
Development and Land Reform• the dti
•	Participation in Poultry Industry
Task Team•	The Land and Agricultural
Development Bank•	Commercial banks• Emerging farmers• Large agri-businesses• Trade unions•	Industry bodies (e.g. Grain SA,
Citrus Growers Association, SA
Poultry Association, Aquaculture
Association of SA, Forestry SA,
SA Sugar Association, Subtrop,
Hortgro, SA Table Grape Industry
Association)•	Research institutions (e.g. CSIR;
universities; Agricultural ResearchCouncil)• Food retailers

Negative values indicate cancellations of approvals made in previous years exceeding new approvals

PROJECTS UNDER DEVELOPMENT
•
•
•
•
•
•

Dehydrated vegetables
Yellow kiwifruit
Dried fruit initiative
Catfish farming and processing
Rural cattle commercialisation projectCommunity forestry

35

AGRO-PROCESSING AND AGRICULTURE VALUE CHAIN
Primary industries such as agriculture, forestry and fishing, as wellas the processing of agricultural products, predominantly for
food, form the bulk of this value chain.

Sector trends

Agricultural production in South Africa experienced significant
volatility in recent years, with 2016 regarded as one of the mostdifficult years for farmers across the country. While 2017 provided
some of the best climatic conditions in summer rainfall areas, asevere drought still crippled winter rainfall areas. In 2018, weather
conditions in both summer and winter rainfall areas ‘normalised’
to within more expected parameters. Production in the foodprocessing industry increased by 4.7% year-on-year, along withan increase of 4.4% in the production of beverages.
Overall exports for the agricultural sector increased by 7.8%
relative to 2017, supported by the improved horticultural
product harvests. Fruit and nut exports in 2018 of R48.7 billion
represented 68% of the total value of agricultural exports. Soyabean exports increased dramatically from R20 million in 2017 to
R196 million in 2018. The increased production volumes in thefood processing and beverage industries also increased exports
by 3.1% and 6.2%, respectively.
Fixed investment expenditure in the agricultural sector fell by
0.9% in real terms in 2018, following a marginal 0.1% contraction
in 2017. This continued decline may be attributable largely
to increased uncertainty about the proposed constitutional
amendment to allow land expropriation without compensation.
Employment in the agricultural sector is highly seasonal. Total
employment (formal and informal) increased from 842 000 to
849 000 from the 3rd to the final quarter of 2018. Employment
in the food manufacturing industry declined by 0.5% and thenumber of employees in the beverages industry reduced by
6.1%.

OUR APPROACH
We focus on developing downstream industries that add value toprimary agricultural produce and create significant development
and jobs. In addition, we support projects in the primary sector
that address shortages of inputs into the processing industry, or
where a new, high-value crop is being introduced in the country.

FUNDING ACTIVITY
Value chain funding approvals increased by 7% to R1 047 million
from R980 million in the previous year. The value of funding
disbursed increased by 16% to R568 million.
In a drive to expand its funding activity, the IDC has been targeting36

investment in funds to reach some markets more effectively andincrease its impact. A large portion of our funding approvals
in 2019 was for investment in two such funds. These funds will
focus on agri-business and support businesses domestically andon the continent.
We expect to create 585 jobs through funding a blackempowered poultry abattoir in Lindequesdrif in the North Westprovince. The project also incorporates the establishment ofbroiler houses and sourcing of chickens from small-scale black
farmers.
In addition to these larger investments, we also supported several
smaller projects that ranged from condiments manufacturing,
fruit packaging and the growing of blueberries, to coolingfacilities and pasta manufacturing.

STAKEHOLDER ENGAGEMENTThe IDC continues to work with stakeholders, including
government, the private sector and communities to facilitate thedevelopment of this value chain. During the reporting period, we
worked closely with the Land and Agricultural Development Bankof South Africa to co-fund projects and develop new products.

DEVELOPMENT OUTCOMESThe number of jobs we expected to create through ourinvestments in the value chain during the past year increased by
35% to 2 252 (2018: 1 668). An additional 391 jobs are expected
to be saved (2018: 1 274). Funding of R97 million was approvedfor Black Industrialists (2018: R109 million), and R73 million foryouth-empowered businesses (2018: R159 million). Funding for
women-empowered businesses increased to R259 million, from
R46 million in 2018.

OUTLOOK
We expected the intermittent rainfall and generally dry conditions
during the traditional maize-planting season to impact
negatively on the overall maize crop during the 2018/19 season.
Similar proportional reductions in harvest sizes are projected
for most of the other major summer rainfall crops. Accordingly,
the agricultural sector may pose a drag on economic growth in2019, with upstream and downstream knock-on effects acrossvalue chains. Continued outbreaks of diseases, such as foot-andmouth, swine and bird flu in recent times, are impacting on theoverall production of meat products.
The IDC continues to seek areas for new investment in the
sector, particularly given the industry’s potential to create jobs,
especially in rural areas.

CASE STUDYMAKHAMISA FOODSENHANCING COMPE TITIVENESS

Makhamisa Foods is a proudly South African condiments company
established in 2014 by two Black Industrialists, Terence Leluma, andPhumzile Nkomo. The food manufacturer specialises in the creationof cold-processed and hot condiments with a product range that
includes a relish and a diverse selection of sauces. All products were
carefully formulated by the founders of Makhamisa Foods.
According to Terence Leluma, the Managing Director of Makhamisa
Foods, the creation of their products was inspired by South Africa’s
food heritage. Their mission is to give the world a taste of Africa
in a bottle. Makhamisa Foods plans to distribute its authentic andflavourful condiments to hotels, restaurants and consumers throughwholesalers and national and international food retailers. Makhamisa
Foods is supported by funding from the IDC and the dti’s Black
Industrialist Scheme.
The company’s world-class facility was customised with newindustrial equipment and the latest technology in food processing.
“The production plant will be completed in June 2019 and once theinstallation and commissioning has been completed, we will employ
33 people to run each shift. Currently, Makhamisa Foods employs fivepeople,” said Leluma.

DE V ELOPMENT IMPAC T
 33 jobs created“With the IDC’s investment, we realised our vision of securing
production facilities that enable us to compete with giant FMCG
organisations within our industry,” said Terence Leluma.

37

LEADING INDUSTRIAL CAPACITY DEVELOPMENTCHEMICALS AND PHARMACEUTICALSVALUE CHAINOPPORTUNITIESINDUSTRY-SPECIFIC RISKS AND
CHALLENGES

FOCUS AREAFERTILISERS•	Improve Foskor’s
competitiveness•	Increase capacity to replace
imports and explore export
opportunities•	Develop primary fertiliser toincrease security of supply

ENERGY•	Increased gas usage as anenergy source•	Increase liquid fuels security
by improving access to crude
oil and refined products•	
Material dependency of theBASIC AND SPECIALITY
CHEMICALS•	Increase local productionof green and other new
chemicals•	Support local manufacturingof chemicals for input into
consumer goods

MEDICAL DEVICES•	Commercialise locallydeveloped technology
PLASTICS•	Improve competitiveness by
upgrading machinery andprocesses•	Manufacture higher-value
plastic products•	Support a circular economy
with high-value end products
from recycled plastics,
recycling capacity, bio-plastics•	Support other value chains e.g.
agro-plastics, pipes and tanks

PHARMACEUTICALS•	Develop the active
pharmaceutical ingredients(APIs) manufacturing industry•	Support new sector entrants•	Develop new
products, including
radiopharmaceuticals andbiologicals•	Support other value chains –animal health

CONSUMER PRODUCTS•	Develop competitive contract
manufacturing platforms for
local and international brandowners•	Develop capacity to
manufacture final products
locally•	Grow/increase capacity to
produce raw materials•	Develop the brands of locally
produced consumer products

INDUSTRY RESEARCH COMPLETED• Difficulties experienced by plastic converters (2019)

•
•
•
•
•
•
•

High-level overview industry analysis on plastics to identify industry-wide focus areas (2018)
Natural latex value chain: study on the manufacture of condoms and lubricants in South Africa (2018)
Gauteng city region chemicals and plastics sector study (2017)
Overview of the plastics industry in South Africa (2017)
Construction plastics - global trends impacting SA (2017)
An analysis of South Africa’s pharmaceutical value (2016)
Fertilisers value chain analysis (2016)38

liquid fuels and petrochemicals
industries on the importation of
crude oil and gas• Water scarcity•	Regulatory registration forpharmaceutical products•	Long lead times forEnvironmental Impact
Assessments•	Access to international
technologies•	Potential negative effect ofcarbon taxes on project viability

INDUSTRY-SPECIFICSTAKEHOLDER AND STRATEGICENGAGEMENTS•	Economic Development
Department• Department of Energy• the dti
• Chemical Industry Association• Transnet National Ports Authority• PetroSA• Durban Chemicals Cluster• Department of Health• National Treasury• Plastics SA• PETCO• Sasol• Chemicals and Allied Industry 		
Association• Technology Innovation Agency• Trade unions• CSIRNegative values indicate cancellations of approvals made in previous years exceeding new approvals

PROJECTS UNDER DEVELOPMENT
•
•
•
•
•
•
•

Establishment of a urea production facility
Beneficiation of local gas resources
Production of pigments
Production of sulphuric acid
Production of chlor-alkalis
Production of active pharmaceuticals
Radiopharmaceuticals manufacturing plant

39

CHEMICALS AND PHARMACEUTICALS VALUE CHAIN
This value chain encompasses the manufacturing of oil
products, basic chemicals, fertilisers, agro-chemicals, paints,
pharmaceuticals and other medical products, soaps anddetergents, plastic products and other related products. Oil andgas storage and distribution are also included in this value chain.

Sector trends

The combined contributions of the coke and refined petroleum
products, basic chemicals, chemical products, pharmaceuticals
and plastic products sub-sectors amounted to 21.8% of total
manufacturing production in 2018. The basic chemicals andother chemical products sub-sectors recorded lower levels of
production in 2018 (-3.2% and -2.8% respectively), while theproduction volume for plastic products increased by 6.5%.
Production volumes for coke and refined petroleum products
remained flat compared to 2017.
All sub-sectors in the value chain increased the value of exports
during 2018 and contributed to 19.4% of overall manufactured
exports. Petroleum products make up the bulk of exports inthe value chain, with neighbouring countries being the mostimportant export destinations.
The sub-sectors in this value chain tend to be capital-intensive.
The 13.2% direct impact of the value chain on creating
employment in manufacturing lags behind other indicators,
such as volume of production and exports. Employment in thecoke and refined petroleum sub-sector was 1.6% lower than in
2017, while employment levels in other sub-sectors increased by
1.9% for basic chemicals, 3.9% for other chemicals and 5.0% forplastic products.

OUR APPROACH
Our funding of upstream industries in this value chain aims
to enhance the competitiveness of downstream industries,
including pharmaceuticals and other consumer products.
Upstream value chain industries and those that provide
inputs into other sectors, such as basic chemicals and plastic
packaging, are integral to downstream sector competitivenessand developing other sectors, such as the agriculture and metals
industry sectors. We also focus on ensuring security of supply for
products such as pharmaceuticals and medical devices.
Implementing this strategy, partly through the support ofearly-stage projects, has led to a steady increase in levels ofinvestment and development outcomes over the last few years.
This is contributing to South Africa’s trade balance, increased
involvement by Black Industrialists in the industry, increased
beneficiation of raw materials and production of intermediary
products that unlock value.

FUNDING ACTIVITYAt R3.1 billion for the 2019 financial year, funding approvals forthis value chain were 42% higher compared to 2018 despite the40

economic environment. The value of disbursed funding also
increased, for the second consecutive year, to R2.2 billion (2018:
R1.6 billion).
Our largest approval was for the establishment of a facility in
Middelburg, Mpumalanga, to produce ethanol from waste
gas. Approval for this investment follows two years of joint
development of the project by the IDC and the project promoters.
Another example of funding approved for Black Industrialists thispast year included investment in a plant to supply oxygen to acopper smelter in Phalaborwa.
In the plastics industry, we continue to support theenvironmentally-friendly use of plastics with an investment ina Gauteng-based existing client that recycles PET to produce
bottles. A project that collects, processes and sells recycled plastic,
paper and cardboard operating in Pretoria East also received
funding. During the year we established a special funding
scheme to support the re-industrialisation of the downstream
plastics industry. The scheme targets some aspects of the circular
economy, sector and product diversification and improvement,
and competitiveness improvements in the industry.
Foskor, a manufacturer of fertilisers and an IDC subsidiary,
continued to face tough trading conditions. The company
intends to make improvements in its mining and phosphoric aciddivisions to improve efficiencies and increase competitiveness.

STAKEHOLDER ENGAGEMENT
We continue to engage with private and public sector players to
improve the environment for industry development and identify
growth opportunities.

DEVELOPMENT OUTCOMESThe number of jobs expected to be created through funding
approvals for 2019 increased to 2 258, a 58% increase over the
1 432 recorded in 2018. We also expect our funding to save 796
jobs (2018: 2). Given the capital-intensive nature of the industry,these direct jobs typically require a larger amount of investment
than in most other industries.
At R1.5 billion, funding of Black Industrialists was 37% higher thanin 2018. Funding for women entrepreneurs increased by 68% toR333 million, while funding for youth-empowered businesses
declined from R274 million to R151 million.

OUTLOOK
The current high levels of capital utilisation in the industry subsectors could indicate a need for additional investment, despite
a cautious approach among entrepreneurs. We continue todevelop projects with the potential to catalyse development in
the local manufacturing industry, such as the establishment ofan urea production facility.

CASE STUDYS WAYA N A G 2 E

E A R LY - S TA G E P R O J E C T D E V E LO P M E N T
R E S U LT I N G I N N E W I N D U S T R I A L
C A PA C I T Y

D E VELOPMENT IMPAC T
 302 jobs to b e created

The Swayana G2E project is a waste gas to ethanol production facility
start-up in Middelburg. The project was jointly developed by the
Swayana promoters and the IDC.
The IDC supported the promoters with project development throughthe bankable feasibility stage. Supported by a well established, listed
operating partner, an off-take agreement and secured gas supply, thiswill be the second commercial plant of this type globally.
Swayana was founded in 2016 as a black-empowered company
with the vision of operating in the South African green fuels andchemical industry. The company is led by Joseph Zinyana and Dr
Kokkie Swanepoel, both successful businessmen with many yearsof engineering experience. Focused on developing projects in thegreen fuels and chemical industry, Dr Swanepoel teamed up with
Joseph Zinyana, owner of a very profitable welding and speciality
engineering solutions company since 2000.
The technology in the plant uses microbes to convert hydrogenand carbon monoxide into ethanol. Demonstrating the commercial
viability of the project locally could open the doors to the installationof several other plants as a viable solution to mitigating greenhousegas emissions.

41LEADING INDUSTRIAL CAPACITY DEVELOPMENT

INDUSTRIAL INFRASTRUCTURE

Negative values indicate cancellations of approvals made in previous years exceeding new approvals

42

We support the development of electricity, water,
telecommunications and logistics infrastructure projects which
unlock the potential for industrial development.

FUNDING ACTIVITY
Despite gross approvals for the year showing only a marginal
decline compared to 2018, cancellations of previously approved
transactions resulted in a 62% decline in the net value ofapprovals to R523 million (2018: R1.4 billion). The cancellations
related mainly to standby facilities previously approved forrenewable energy projects that were implemented without
using the facilities. As a result, the unutilised commitments werecancelled. Other projects, including one to develop a smart city,were also cancelled. Compared to R2.9 billion in 2018, only R2.0
billion was disbursed in 2019.
In 2018, approvals included funding for a 100MW concentrated
solar power project in Postmasburg in the Northern Cape to agroup of young entrepreneurs. Additional funding was approvedin 2019 for inclusion of community participation and project
construction.
We also approved early-stage project funding for an independent
power producer to construct a coal-fired power plant to provide
electricity to Sasol’s synfuels plant in Secunda, Middelburg.
Further afield, we are participating in the funding for theconstruction of a 450MW combined-cycle gas turbine power
plant in Mozambique. The plant will contribute to the Southern
African power pool and improve grid stability for the whole
region.
In the telecommunications sector, we approved funding for a
black women-owned consortium to buy out a turnkey fibreoptic services company.

DEVELOPMENT OUTCOMES
Infrastructure projects typically create large amounts of direct
jobs only during the construction phase. The jobs created throughbusiness activity that is unlocked through the infrastructure
projects that we fund are not accounted for in the numbers
we publish. While cancellations of some previously-approved
projects resulted in a negative net number of jobs for the year,
we expect to create 291 direct jobs through newly approved
projects.

OUTLOOK
South Africa still faces a significant backlog in infrastructure
provision. While cutbacks in direct spending investment by
SOEs are impacting the industry, the IDC forecasts increased
opportunities for the private sector to become involved indeveloping and funding projects.
We welcome the additional allocations to renewable energy
projects indicated in the draft Integrated Resource Plan 2018. We
also intend to widen our reach in the rest of Africa to support
regional integration and intra-Africa trade, with specific emphasison the energy, water, ICT, transport and logistics sub-sectors.

CASE STUDYS U S TA I N A B L E H E AT I N GHOLDINGSE N V I R O N M E N TA L LY
F R I E N D LY E N E R G Y
D E VE LOPM E N T IM PAC T
 9 jobs createdSustainable Heating Holdings was established in 2013 with a
specific focus on generating steam from biomass and selling it to
manufacturing plants for use in their production processes.
The company was awarded a contract with a large dairy inPort Elizabeth in the Eastern Cape to supply their plant withsteam. The heat from the steam is used to produce ultra-hightemperature treated milk.
Sustainable Heating Holdings uses woodchip-waste to produce
the heat used to generate steam. This is considered moreenvironmentally-friendly than using alternative fuels such as
heavy fuel oil. It is also a more cost competitive alternative.
This will be the seventh similar plant that Sustainable Heating
Holdings builds.

Black-empowered companies will receive R1.4 billion of thefunding approved in 2019 (2018: R297 million). Cancellations oftransactions approved in previous years for women and youth
entrepreneurs exceeded new approvals.

43

LEADING INDUSTRIAL CAPACITY DEVELOPMENT

CLOTHING, TEXTILES, LEATHERAND FOOTWEAR

44

The clothing, textiles, leather and footwear industries are labourintensive and, therefore, instrumental in creating jobs in the South
African manufacturing sector. Interventions by government andthe IDC over a number of years to improve competitiveness inthe sector have been negatively impacted by the downsizing or
closure of some manufacturers due to the prolonged economic
downturn. Despite this stagnation, some businesses are thriving
and growing.

CASE STUDYGLODINA TOWELINGIMPROVING COMPE TITIVENESSFUNDING ACTIVITY
The IDC increased the value of funding approved for the industry,
for the second consecutive year, in 2019 to R977 million, 64%
higher than in 2018. Similar to previous years, the value ofindustry disbursements was far lower than that of approvals due
largely to using payment guarantees to facilitate funding. These
guarantees allow companies to obtain funding from commercial
banks and allow the IDC to leverage its funding.
The largest portion of funding approved during the year went
to a manufacturer of men’s and ladies’ clothing and footwear
to enable business growth. Given the financial difficulties of
Edcon, a major shareholder in the company, other retailers werereluctant to increase their orders. Our funding allows the businessto continue with its modernisation and expansion plans, increase
its retailer customer base, while continuing to support existingcustomers, and compete more meaningfully with imported
products.
Funding of R385 million was approved for companies operatingin the textiles industry in 2019 (2018: R511 million).

D E VE LOPM E N T IM PAC T
 1 674 jobs saved
 1 385 new jobs exp ec ted

Glodina Toweling was a powerhouse in the South African
toweling industry, with over 60 years as the preferred provider ofsuperior towel products to top retailers. The company is exploring
ways to extend its brands and the CEO, Mark Goliath, believes thata higher level of product diversification and segmentation willlead to new avenues for growth.
After many loss-making years, Glodina’s shareholders opted toclose the company and sell its assets. The IDC acquired these in2018 and restarted the company’s operations. The company aims
to increase its production capacity to cater for national retailers
and the hospitality industry and reclaim its esteemed brandposition in the market.

DEVELOPMENT OUTCOMES“As production grows, we want to grow the number of
employees,” said Mark. The IDC investment boosted production
and helped Glodina to acquire assets and source raw materials for
its products.

Due to funding from the IDC, we expect to create 1 515 jobs andsave an additional 1 674 (2018: 1 294 jobs created; 1 315 jobs
saved). The total number of expected created and saved jobs is
22% higher than in 2018.

Glodina plans to regain sustainability by realising theopportunities lost while the company was closed. The IDC
investment could also contribute to the company trading in theexport market.

The R583 million in funding approved for black empowered
companies was 120% higher than in 2018. These figures
include companies where workers own more than 25% of theshares. The IDC often uses the incorporation of workers into
the shareholding structure of companies to introduce broadbased black ownership into businesses. Unfortunately, the valueof funding for women and youth entrepreneurs declined from
R34 million to R3 million, and from R54 million to R10 million,
respectively.

OUTLOOK
We are pursuing a number of opportunities in the sector. These
include taking advantage of the fast fashion trend. We support
retailers and especially local manufacturers to adapt to supplying
into the fast fashion model. We continue to work closely with
the industry to develop a strategic master plan that includes all
stakeholders. We are also exploring projects in other areas, suchas natural fibres and recycling.

45

LEADING INDUSTRIAL CAPACITY DEVELOPMENTNEW INDUSTRIES

46

This IDC unit promotes the establishment of new industries
as the foundation of South Africa’s future economy. The unit iscurrently focusing on:• The clean energy solutions industry• 4th Industrial Revolution-enabled industries• The natural products industry•	The gas separation value chain centred around an innovative,
locally-developed technology.

FUNDING ACTIVITY
The unit has been developing projects and investing in smaller
businesses since 2015. During the past financial year, several
prioritised new industries received significantly large investments
for the first time. This contributed to the R544 million in funding
approvals for the year, compared to R128 million in 2018. The
value of disbursed funding increased to R184 million in 2019,from R128 million in 2018.
The largest portion of funding was destined for companies
pursuing clean energy solutions. This included funding for acompany that developed an integrated energy generationand management solution using solar generation equipment.
Operating in South Africa and neighbouring countries, thecompany uses Internet of Things (IoT) technologies to optimise
energy consumption and facilitate the autonomous operationand maintenance of sites after installation.
We also approved funding for a black-owned company that
produces inverters to be used with renewable and other sourcesof electricity generation. Our funding was also used to test a
Vanadium Redox Flow Battery for the production of vanadiumelectrolytes and ultimately, should these tests be successful, theassembly and local manufacture of the batteries.
Support for Black Industrialists included funding approval for acompany that will produce nano-precipitated calcium carbonate
in Richards Bay in the first commercial-scale nanomaterials
production facility in Africa.
The 4th Industrial Revolution spans several technologies and istypically defined as integrating the use of these technologies
to create new business models that disrupt the status quo. Oneof the companies that we funded in this area is a black-owned
business that uses telematic devices built into vehicles, cloudconnectivity and data analysis to provide detailed analytics
to fleet owners that enable safety improvements and cost
reductions in fleet management.

The funding of black-empowered companies increased from
R60 million in 2018 to R263 million in 2019, while Black
Industrialists received R136 million, compared to R63 million
in 2018. Funding for women entrepreneurs increased to R120
million (2018: R15 million).

OUTLOOK
The pace at which new technologies and markets are developing,propelling growth and development of new and existing sectors
globally, is creating significant investment opportunities. This
provides opportunities for South Africa to establish itself as asignificant player in such sectors going forward.

CASE STUDYARIOGENIXSUPPORTING SOUTH AFRICANT E C H N O LO G Y E X P O R T S
D E VE LOPM E N T IM PAC T
 20 jobs created
ArioGenix has established itself and built a track record as a project
integrator in the nuclear, energy, defence, aerospace and mining
sectors. Since 2015, ArioGenix has been developing a range of
renewable energy solutions (inverters, rectifiers and soft-starters)
targeting the growing global renewable energy generation
market. The IDC funding will enable ArioGenix to fund productqualification, obtain certification and complete value engineering
to reduce manufacturing and assembly costs, improve productreliability and streamline production processes for its products.
ArioGenix has also developed a strong relationship with Mitsubishi
Electric Europe and the company was accepted as a Mitsubishi
factory partner in 2017. Mitsubishi is currently marketing and selling
ArioGenix’s soft-starter products under the Mitsubishi brand in 41
countries across Europe and East Asia. Similar arrangements arebeing negotiated for its other product lines.
The state-of-the-art renewable energy products available from
ArioGenix are easy to install, generate no harmful greenhouse gases
and harvest renewable energy efficiently.

DEVELOPMENT OUTCOMES
The higher levels of funding activity for these industries increased
development outcomes, with the expectation of creating 827
jobs (2018: 28) and saving 209 jobs.

47

LEADING INDUSTRIAL CAPACITY DEVELOPMENTOTHER MANUFACTURING
AND RELATED INDUSTRIES48

In addition to the support for the manufacturing industries
covered in the previous sections, the IDC also funds the wood andpaper, glass, rubber, cement, non-metallic minerals, electronics,
furniture and other manufacturing industries.

CASE STUDYFUNDING ACTIVITYMARA PHONESThe value of funding approved during the year decreased by
68% to R579 million (2018: R1.8 billion), while R748 million was
disbursed compared to R2.1 billion in 2018.

LO C A L M A N U FA C T U R I N G O F
HIGH-TECH PRODUC TS

The lower value of approved and disbursed funding was due toa R1.5 billion line of credit approved for a Pan-African DFI in 2018
for on-lending to clients, particularly cement producers, the sizeof which could not be repeated in 2019.

D E VE LOPM E N T IM PAC T
 450 jobs createdDuring the past year, the IDC also supported other businesses
with funding. These included a manufacturer of smart mobile
phones in Durban, a Black Industrialist who is setting up factories
to produce polyurethane insulated metal and flexible faced
panels for building applications, a company that currently tradesin finished melamine board to create manufacturing capacityand various companies manufacturing diverse cement products,
including curb stones, roof tiles and bricks.

The Mara Group, founded by Ashish J. Thakkar, manufacturesa range of smartphones for the consumer market. The Group’s
smartphones are produced under the Mara Phones brand andconsist of the Mara X and Mara Z models. Established in 1996,
Mara has been active on the continent for over two decades. It has
grown from a small computer hardware trading firm in East Africa
to a multi-sector group with investments and operations in 25
countries across the African continent.

DEVELOPMENT OUTCOMES
Funding approved during the year is expected to create 794 jobs
and save 500 (2018: 6 115 created and 1 155 saved). 2018 saw alarge number of jobs expected to be created through funding fora construction company. No similar transactions were approvedin 2019 and the numbers achieved are more in line with what
can be expected from funding for the manufacturing industries
alone.
Funding for Black Industrialists decreased to R65 million, from
R583 million in 2018. The value of transactions for women
entrepreneurs that were cancelled during the year exceeded
new approvals, while funding for youth entrepreneurs stood at
R47 million (2018: -R75 million due to cancellations).

“The first high-specification, affordable smartphone manufacturer
in Africa, Mara Phones is committed to enhancing and enriching
the lives of the people of Africa. Manufacturing in Africa enables
job creation and also makes the smartphone more affordable
to all, contributing to business growth and development on thecontinent. Manufactured in Africa, ready for the global market!”,according to a statement by the Mara Group management.
Mara’s growth has been driven by selectively partnering withmultinationals and individuals with subject matter expertise,
thereby combining global best practices with Mara’s local
knowledge and operational know-how.
The Durban factory is situated at the Dube TradePort Special
Economic Zone (SEZ). The phones will also be manufactured atanother plant in Rwanda, with plans to expand its manufacturing
operations into West Africa in the near future.

OUTLOOK
Weak domestic economic conditions resulting in low investor
confidence remain a challenge. There are, however, opportunities
that are being pursued to develop and transform these subsectors. These include Black Industrialist participation in industry
transformation, rationalisation and consolidation, assisting local
manufacturers to expand into the rest of Africa, and pursuing
opportunities related to alternative construction materials.

49

LEADING INDUSTRIAL CAPACITY DEVELOPMENTTOURISM, MEDIA AND ICT50

In addition to funding development in manufacturing industries,
we also provide development finance for high-value services
in the tourism, media and ICT industries. The media industry
includes funding for film production, studio infrastructure, andradio and television broadcasting.

FUNDING ACTIVITY
Funding for these industries increased to R1.2 billion in 2019,from R827 million in 2018. Funding allocations ranged from
49% of total funding for the media industry, 43% for the tourism
industry and 8% for ICT services.
During the past financial year, we supported a number of film
productions, some co-produced by local and international
producers, as well as the production of television series, including
a 10-part action-adventure series.
In the tourism industry, we provided funding for a luxury lodge
in Mozambique, a 120-bed hotel and conference venue inThohoyandou, Limpopo, and a lodge in the Mkhambathi Nature
Reserve in the Lusikisiki district of the Eastern Cape.

DEVELOPMENT OUTCOMES
We expect our funding within these services sectors to create
1 937 jobs (2018: 1 371) and save an additional 27. Jobs createdby films are typically of a short-term nature, as individuals moveon from one film to the next. We do not account for these jobs as
full-time and, as such, these numbers do not represent the total
number of individuals who are impacted by our activity in thisindustry.
Funding for Black Industrialists declined to R686 million, from
R733 million in 2018. The funding of women entrepreneurs
doubled to R675 million and for youth entrepreneurs the amountincreased by 76% to R460 million.

CASE STUDYTOUCH HD AND MARKETINGINVESTING IN NEW DELIVERYP L AT F O R M S
D E VE LOPM E N T IM PAC T
 21 jobs createdStarted in April 2017, Touch HD and Marketing is an internet
radio station that strives to pioneer digital radio on the African
continent. Internet radio is an audio service that uses the Internet
as the broadcast distribution medium rather than traditional
radio waves. The station is available through a dedicated website
and smartphone applications on iOS and Android. The station
offers online access to live sound streaming of radio content,
pre-recorded podcasts and live and recorded video streaming.
Touch HD offers a mix of 80% music, and the balance consisting ofcelebrity news, interviews, current affairs, news and entertainment
updates.
Touch HD broadcasts live and recorded content from studios in
Sandton. In its first year of operations, Touch HD secured over one
million user connections at an aggregated growth rate of over
250% per month from April 2017 to January 2018.
The company approached the IDC for a loan facility to fund capex
and working capital to expand their online digital radio station.
CEO and radio presenter at the station, Thabo Molefe, is one of thetwo shareholders at the company.

OUTLOOK
The tourism industry still holds many opportunities fordevelopment. Growth in our secondary and coastal cities andsome countries elsewhere on the continent with expanding
economies continue to increase demand for hotels.
The media industry has experienced significant technologicaldisruption over the past number of years. This creates
opportunities for the IDC to invest in other areas of the media
and audio-visual value chains. New content distribution networks
require investment into content that is more attractive to aninternational audience if costs are to be recouped.

51

ADDRESSING THE MARGINALISEDBACKGROUND
The IDC embraces the development of a more inclusive economy
by actively addressing social and regional development objectives
that emphasise developmental returns with maximum impact.
Sometimes, these activities involve enterprises that would
not qualify for funding through the IDC’s commercial businesschannels and that are often supported by donor grants andstrategic partnerships.
We engage with the government and private sector, as wellas with social partners and other role-players, to enhance theimpact of identified funding opportunities, either as stand-alone
projects or linked to regular commercial IDC projects.
The aim of these interventions is greater inclusivity andparticipation by marginalised groups and communities in
economic opportunities and, specifically, to increase theimpact of specific developmental outcomes. These include
township economies, regional equity, community and worker
empowerment, and employee empowerment.
Our Corporate Social Investment activities are aligned with the
IDC’s broader development goals.

OVERVIEW OF ACTIVITIESWorker and employee empowerment and ownership
Where possible, in pursuit of transformational impact in supportof workers and communities, some of the IDC’s transactions
include workers and communities as shareholders. Trusts areused as legal entities for workers and communities to acquire
equity in IDC-funded companies, where appropriate. Most of
the Workers’ Trust beneficiaries who receive IDC funding arepermanently employed, lower-level employees. Community
trust beneficiaries are communities that live in close proximity to
the IDC-funded projects.
Since 2002, we established 105 Workers’ Trusts, 11 Community
Trusts and 22 Renewable Energy Independent Power Producers
Procurement Programme (REIPPPP) Trusts. During 2019, 10transactions were approved that established trusts.
We take responsibility for assisting business partners to establish
well-governed Workers’ and Community Trusts. This includes
the registration of trusts, alignment of the Trust Deeds with ourTrust Policies and relevant government legislation, facilitationof processes to elect boards of trustees and beneficiaries andto manage the trusts. These activities help to ensure that theintended trust beneficiaries, typically inexperienced about trusts
and their administration, can have a meaningful influence over
the trust and ensure that the intended benefits are realised.

52

Formalising and implementing trusts do not automatically realise
benefits for beneficiaries. Some benefits, such as dividends,
depend on business performance. We are still piloting an Early
Realisation of Benefits Initiative to address this. The objective is to
fast-track the realisation of benefits to employees and community
members by funding the respective trusts to establish trustowned companies that will deliver services to the investee
company to realise profits and cash flows from the outset. We
approved five of these Early Realisation projects in 2018, with anadditional approval in 2019.
During the reporting period we undertook research to
study the status of workers and community trusts that havebeen established since 2002. The research focussed on trust
performance and impact.
Based on the research findings, we are considering some of thefollowing to improve the performance of established trusts:• Improving internal IDC collaboration•	Strengthening the training, capacitation and empowermentof trustees to execute roles and meet obligations effectively,
including greater access to mentors and advisors•	Fast-tracking strategy implementation for earlier realisation
and release of dividends and benefits•	Implementing a more robust monitoring and evaluation
framework.

Funding within the social economy
The social economy is a response to the unmet social andenvironmental to address poverty, poor healthcare andinfrastructure services, environmental issues, lack of accessto basic services and resources, social market failures and thebreakdown of social capital, among others. This sector’s primaryobjective is to address social problems through financiallysustainable business models where surpluses, if any, arereinvested for that purpose.
Experiences elsewhere in the world have shown that, compared
to conventional businesses, this sector is more robust, innovative
and agile when operating in deprived communities and actively
employing disadvantaged groups who are generally shunned byconventional businesses.
Social Enterprises
In 2012, we introduced the Social Enterprise Programme tosupport private sector enterprises that focus on social outcomes
rather than maximising profit.
We have partnered with the Government of Flanders, which
provided funding of €7 million over five years, to support the
programme.
Since the inception of the programme, we approved transactions
totalling R165 million that support 23 329 beneficiaries. During

2019, we approved funding of R3.0 million for one social
enterprise. The lower levels of activity in this area resulted froman increased focus on the Special Intervention Programme.

where 14 schools received fully-fledged ICT centres. We partneredwith the Adopt-a-School Foundation to roll out this initiative.

Special Intervention Programme
The Special Intervention Programme addresses the socioeconomic and developmental needs of targeted areas throughpublic, private and community partnerships. This has resulted inmany innovative and impactful initiatives in marginalised areas,
including townships and rural areas.

Entrepreneurship development received 8% of the IDC’s total CSI
spend in 2019. The Mogalakwena-Groenfontein Training Farmand Training Centre was one of the beneficiaries. The project
included the expansion of the farm and training centre with anadditional 50-hectare open land drip irrigation system and theestablishment of 10 black-owned farming businesses. Our project
partners were the Mogalakwena Incubator NPC and the NYDA.

Since the inception of this programme, funding of R227 million
has been approved for 68 projects. These projects support
31 417 beneficiaries. During the 2019 financial year, 15 projects
to the value of R51 million were approved. These support 8 339
beneficiaries.

Projects in other categories, including the new consumer
education category, received the remaining 24% of the funding.
Consumer education is a new CSI category that was added in
2019, partly to comply with the requirements of the Financial
Services Sector B-BBEE Code.

The Special Intervention Programme is also used to fund inclusive
business opportunities for marginalised entrepreneurs to benefit
from business procurement opportunities.

More detailed information on these and other CSI initiatives isavailable online.

The Special Intervention Programme replaced the Development
Agency Programme previously supported by the IDC since 2002.
We do not provide new funding to Development Agencies but
continue to provide technical assistance, advice and support on
local economic development matters and projects to agencies
and municipalities.

Spending per CSI category

Corporate Social Investment (CSI)
Our CSI programme, introduced in 2002, aims to increase
the IDC’s social impact through welfare and social upliftment
initiatives. The programme supports the priority areas of the NDP
and selected SDGs.
In 2019, we disbursed R50.6 million, 61% more than in 2018,
to support 28 CSI initiatives (2018: 35 initiatives). These funds
assisted approximately 51 000 individuals and created 423
permanent and 85 temporary jobs.

R34.6m - Education and skills development
R2.2m - Consumer education
R4.0m - Entrepreneurship development

In line with the objectives of the programme, education and skills
development initiatives received the largest benefit (68% of thetotal). One of the projects that benefited is an ICT programme

R3.9m - Employee volunteering and giving
R5.8m - Strategic special investigations

53

OUR B-BBEE RATINGBACKGROUND
As one of the country’s transformation and empowerment
facilitators, the IDC is leading by example in implementing
the Codes of Good Practice for Broad-based Black Economic
Empowerment (B-BBEE).
The Financial Sector Codes (FSC), published in December 2017,
require DFIs to be measured against this scorecard. In July 2018,
the IDC was rated as a Level 4 contributor according to the FSC
scorecard, the same level as was achieved in the previous year
under the Generic Codes.
The FSC evaluation of the IDC affected the IDC’s B-BBEE strategy
and required an evaluation of the budgetary and other impacts
that these Codes have on the IDC. The FSC were developed
specifically for the private banking and insurance sectors and not
for the unique role of DFIs. DFIs are currently engaging with the
Financial Sector Transformation Council (FSTC) to address thisissue.

In addition to our own rating, we encourage our business partners
to embrace the aims of all pillars of the Codes and applicablesector charters to transform their businesses accordingly.
We expect all clients to achieve at least a Level 4 contributor
rating to expedite transformation. Where clients do not meet thislevel when applying for funds, we provide advice and supportand expect them to achieve the required rating within two yearsof funding approval.
In 2016, the IDC was granted B-BBEE Facilitator Status for use
under specific circumstances. This status allows companies inwhich we have a shareholding to regard the IDC’s ownership
portion as Black instead of excluding this from calculations,as would normally be done for organs of state. This applies toearly-stage projects, venture capital investments and distressedbusinesses only.
Clients that fall into these categories need to apply to recognise
the IDC’s shareholding as Black. Each application is considered
individually and approved in conjunction with the dti. Twoof IDC’s clients currently benefit from this provision, namely
Sheraton Textiles and Cast Products SA.

Score by Element of the B-BBEE Codes

Score
60
50

Full B-BBEE
scorecardand report

50

40
36.6

20

25

30

20
18.0

17.3

5

10

7.0

0
Management control

IDC Score54

Skills development

Weighting for element

Enterprise and supplierdevelopment

Socio-economic development

COMMITTED TO GOOD GOVERNANCE
IDC VALUESBOARD OF DIRECTORSThe IDC has always strived to achieve and maintain thehighest standards of ethics and corporate governance. Sound
governance is a cornerstone of our sustainable business modeland is integrated in all our operations.

Responsibilities

We live the IDC values of passion, partnership and professionalism
by implementing our Corporate Governance Framework andCode of Ethics and Business Conduct. We also take the lead, aspart of our development agenda, in introducing the principles ofsound governance to our clients.
Our corporate governance structures are designed to ensure thatthe Board and Executive Management can exercise their fiduciary
duties in a fair and transparent manner.

KEY GOVERNANCE ENHANCEMENTS
We continued to place particular emphasis on the governancestructures of our subsidiaries and investee companies during
the reporting period. The table below summarises the key
enhancements achieved during the past financial year.
Key governance enhancements for 2019
Enhanced governance reviews forlarge transactions

Implemented a process of enhanced reviewsof the corporate governance systems andprocesses of larger clients, i.e. transactions
for investments of R250 million and above.

Directors’ training

Implemented a comprehensive directors’
training programme as part of the implementation of the Director Nominations
Policy to address needs identified during
our ongoing communication sessions withnominee directors.

Enhanced dataand information
management andsecurity

Approved a roadmap for the development
and implementation of the Protection of
Personal Information Act, 4 of 2013, in termsof the Data and Information Management
Policy, approved in 2018.

GOVERNANCE FRAMEWORK
Legislation, Codes of Best Practice and Policies
The IDC’s governance framework consists of:• The Industrial Development Corporation Act, 22 of 1940 (IDCAct)
• The Public Finance Management Act, 1 of 1999 (PFMA)• Treasury Regulations• The Companies Act, 71 of 2008
• The King Reports on Corporate Governance (King IV)• The Board Charter• Policies and internal systems and procedures.

The Board of Directors regard corporate governance as integral
to the success of the Corporation and is committed to applying
the principles necessary to ensure that sound governance ispracticed in all the IDC’s dealings. The Board determines thestrategic direction of the Corporation, approves the related
policies and plans and monitors implementation by the Executive
Management.
An annual work plan is in place, which ensures that all thebusiness of the Board is attended to in a structured and orderly
manner throughout the year.

Composition
The Board is constituted to ensure that the appropriate balanceof knowledge, skills, experience, diversity and independence
exists to discharge its governance role objectively and effectively
in meeting the Corporation’s strategic objectives.
The size of the Board is determined by the IDC Act, which permits
the appointment of a minimum of five and maximum of 15
directors by the shareholder. A unitary Board structure is applied,with the majority of directors as non-executive members.
As at 31 March 2019, the Board comprised of one executive and
11 non-executive members, with a gender composition of sevenfemale and four male non-executive directors. The positionsof Chairperson and CEO are held separately to ensure a clear
separation of responsibilities.
Members of the Board assume collective responsibility forsteering and setting the direction of the Corporation. The Board is
responsible to the shareholder for setting strategic objectives andkey policies, major plans of action, a risk policy, annual budgets
and business plans. Performance monitoring and reporting
systems are used to achieve the performance objectives set by
the shareholder.
Directors have complete access to senior management
through the Chairperson, CEO or the Company Secretary at
any time. Senior management provide regular presentations at
Board meetings and directors may seek briefings from senior
management on specific matters.

Induction
New directors participate in a formal induction processcoordinated by the Company Secretary. The induction processincludes briefings on financial, strategic, operational and risk
management policies and processes, the governance framework,organisational culture and values, and key developments at the
IDC and in the sectors and environments in which the Corporation55

is active. This ensures that, from the outset, new directors areprovided with sufficient knowledge about the Corporation.
The directors’ initial induction is the first step in a continuous
process of keeping our Board members equipped for theirtask. Additional meetings, training and information sessions
are provided to ensure that the Board can deal timeously andefficiently with all important issues that the IDC faces. Priority isgiven to providing directors with additional information about
specific matters when requested, and care is taken to ensure that
directors have sufficient knowledge to exercise their duties ofcare, skill and diligence.

Board meetings and attendance
The Board meets at least seven times a year and holds a strategy
session at least once a year. Special Board meetings are convened
when necessary. During the reporting period the Board met a
total of 11 times and, in addition, Board strategy sessions were
held during September 2018 and February 2019.

Demographics**Non-executive directors

56

Changes to the Board
Our previous CEO, Mr MG Qhena, resigned from his position andleft the Corporation at the end of December 2018. The new CEO,Mr TP Nchocho, commenced his duties on 1 January 2019. There
were no other changes to the Board during the reporting period.

Terms in office
The non-executive Board directors have been in office for theperiods indicated below:• Ms Mabuza: 7.5 years• Ms Bethlehem: 10.5 years• Mr Dames: 7.5 years• Mr Godsell: 7.5 years• Mr Kriel: 3 years• Dr Magwentshu-Rensburg: 7.5 years• Ms Mnxasana: 4.5 years• Ms More: 3 years• Ms Mthethwa: 7.5 years• Adv Orleyn: 4.5 years• Dr Zalk: 7.5 years

Tenure*Board Charter

Board structure and meeting attendances

A Board Charter is in place that sets out the Board’s responsibilities,
including the adoption of strategic plans, development of a clear
definition of materiality, monitoring of operational performanceand management, determination of policy processes to ensure
the integrity of the Corporation’s risk management and internal
controls and communication policy and director selection,orientation and evaluation. The Board Charter was reviewed
during the reporting period and the amended Charter approvedby the Board on 28 February 2019.

The Board Charter requires Board members to use their best
endeavours to attend Board meetings and to prepare thoroughly
beforehand. The IDC’s Board structure and a summary ofmembers’ meeting attendances during the reporting period areprovided in the table below.

The Board Charter provides that Board and Board Committee
members may obtain independent professional advice asconsidered necessary to carry out their duties, which is paid forby the Corporation. If required, such advisors are invited to attend
Board and/or Board Committee meetings.
The Board Charter sets out processes for arranging Board or
Board Committee meetings and managing Board documents,
confidential information and conflicts of interest.

Board
Investment
Committee

IDC Board
Responsible for the
performance of the
Corporation while
retaining full andeffective control

Number of meetings
Non-executive directors
BA Mabuza
LI Bethlehem
BA Dames
RM Godsell
AT Kriel
SM Magwentshu-Rensburg
NP Mnxasana
M MorePM Mthethwa
ND Orleyn
NE Zalk
Executive directors
MG Qhena2,3
TP Nchocho2, 4
Other members of committees
R Pitot5
Z Luthuli6
B Makwane7
Chairperson of the respective committee
Not a member of any sub-committee
3
Resigned 31 December 2018
4
Appointed 1 January 2019

Considerstransactions
mandated to it
by the Board andreviews related
party transactions.
Particulars
of approval
thresholds areprovided on page
60

Board Committees
The Board has established five standing committees to assist
it in exercising its authority. Authority has been delegated to
the Board Committees to promote independent judgement
and assist with the balance of power and effective dischargeof the Board’s duties. This is done through a Board-approved
and regularly updated Terms of Reference to stay abreast ofdevelopments in corporate law and governance best practice.
The Chairperson of each Board Committee is a non-executive
director. All Board Committee members are appointed by
the Board of Directors, with the exception of the Board Audit
Committee, whose members are appointed by the shareholder
at the AGM. Board Committees submit reports on theirdeliberations, conclusions and recommendations at a Board
meeting following sub-committee meetings.
Board Human
Capital andNominations
Committee

Board
Board Audit
Risk andCommittee Sustainability
Committee

Develops
compensation
policies,
resourcing plansand performance
goals

Monitors theadequacyof financial
controls andreportingCommittee membership and number of meetings attended
11
15
7
7
111
10
10
7
10
10
10
9
8
8
8

14

Governs risk
and ensures
responsible
stewardship of
the Corporation’s
assets andsustainability

Promotes the idealsof corporate fairness
and transparency,social and economic
development andgood corporate
citizenship, andmanages the
Corporation’s
exposure to
reputational risk

5

4

5
61
6
5

141
13
11
13
13

Board Socialand Ethics
Committee

51
5
5
1
7
71
5

4

5
4
5

4

31
4

5
2
7
4
3

1

5

2

6
7

Co-opted member of the committee
Divisional Executive: Corporate Affairs
General Counsel and Group Company Secretary57

Reports by the Board Committee Chairpersons appear on
pages 74 to 81 of this report and a summary of Committee
members’ qualifications on pages 24 and 25.

The Committee held five meetings during the reporting period.
A summary of the key focus areas appears in the Chairperson’sreport on page 78.

Board Audit Committee
The Board Audit Committee provides independent oversight ofthe effectiveness of the IDC’s assurance functions and services
and the integrity of its annual financial statements.

Board Social and Ethics Committee
The Committee assists the Board in discharging oversightof organisational ethics, responsible corporate citizenship,sustainable development and stakeholder relationships.

The Committee is constituted in terms of section 94 of theCompanies Act, 71 of 2008. The CEO, Chief Financial Officer,
Auditor-General and external auditors are permanent invitees tothe meetings of the Committee.

The Committee is constituted in terms of Regulation 43 of theCompanies Regulations. The six-member Committee consistsof four non-executive directors and the IDC’s General Counsel
and Divisional Executive: Corporate Affairs as the two executive
directors. The CEO is a permanent invitee to Committee meetingsand other executives may be invited to join meetings whenmatters within their respective areas of responsibility form partof the agenda.

The Committee currently consists of five members and held
seven meetings during the reporting period. The key focus areas
are contained in the Chairperson’s report on page 75.
Board Human Capital and Nominations Committee
The Committee was constituted by the Board to assist with thedevelopment of remuneration policies, succession planning,
performance goals and specific remuneration levels. The
Committee also manages the Board’s annual evaluation of the
CEO’s performance.
The Committee currently consists of five non-executive members
including the Board Chairperson. The CEO and the Divisional
Executive: Human Capital are permanent invitees to Committee
meetings.
The Committee held seven meetings during the reporting
period. A summary of key focus areas during the reporting period
is contained in the Chairperson’s report on page 74.
Board Investment Committee
This is a credit-granting Committee, constituted by the Board toconsider transactions mandated by the Board. The Committee’s
approval thresholds are provided in the summary of the IDC’s
Delegation of Credit Approval Authority on page 60.
The Committee currently has six non-executive members, one ofwhom is the Board Chairperson. The CEO, any Board members
and other interested parties are invited to attend Committee
meetings.
The Committee held 15 meetings during the reporting period. A
summary of key focus areas are summarised in the Chairperson’sreport on page 74.
Board Risk and Sustainability Committee
The Committee was constituted to assist the Board with risk
governance oversight.
The Committee currently has five non-executive members,
including the Board Audit Committee Chairperson. The CEO and
Chief Risk Officer are permanent invitees to Committee meetings,
while the Chairperson, at her discretion, may invite other Board
members, executives or employees to attend meetings.

58

The Committee held four meetings during the reporting period.
A summary of key focus areas are contained in the report
Chairperson’s report on page 79.

Managing Directors’ conflicts of interest
At every meeting attended by Board members, subsidiarydirectors and executive management, members are required
to disclose any potential conflicts and if required, to withdraw
from the proceedings. Declarations of conflict are also made to
the Company Secretary as and when necessary. This is done incompliance with section 50(3) of the PFMA, section 75(4) of theCompanies Act, the IDC Guidelines on Conflict of Interest andthe Conflict of Interest Policy. The declarations are made at each
Board meeting, at meetings of the Board Committees and inparticular, the meetings of the Board Investment Committee andall other committees responsible for considering transactions.
High ethical standards and business acumen are among criteria
set for Board membership. The Board Charter states clearly thatmembers must act in the best interests of the Corporation
at all times. The Board’s Code of Conduct requires Board andBoard Committee members to conduct their fiduciary duties
in an ethical manner to ensure compliance with relevant laws
and regulations, audit and accounting principles, and the
Corporation’s own governing documents and Codes of Conduct.

Board evaluations
The overall effectiveness and performance of the IDC Boardand individual Board Committees was not evaluated during thereporting period. However, feedback on the Board’s effectivenessthrough a review in 2017 was positive and assessed the Board
as well-functioning and professional. Matters that required
attention included:• Succession planning for the CEO, senior management andother key employees is in place at Board level• Selection and appointment of Board members take into
account the views of management and existing directors
about the skills and experience Board members require• Ongoing training takes place through continued
professional development programmes for directors, regularbriefings on changes in risks, laws and the environment andmentorship programmes for inexperienced Board members.

Board remuneration
The Board Human Capital and Nominations Committee plays
an advisory role in the remuneration of Board members. Nonexecutive directors are remunerated for the meetings theyattend at rates approved by the shareholder. No performancebased remuneration or retainer fees are paid to directors.
The table below reflects the remuneration paid to non-executive
directors during the reporting period.
Directors’ remuneration
Name of director

BA Mabuza

20193

2018

R’000

R’000

Company Secretary
The Company Secretary provides the Board with professional
and independent guidance on corporate governance and its
legal duties. In addition to coordinating the functioning of theBoard and its Committees, the Company Secretary acts as acentral source of information and advice to the Board on mattersof ethics, adherence to good corporate governance principles
and compliance with procedures and the applicable statutes andregulations.
The Company Secretary is not a director of the Corporation
and acts independently from the Board. Aligned with good
governance, the appointment and removal of the Company
Secretary is a matter for the Board.
The Company Secretary, Mr P Makwane, fulfils a dual role by also
serving as General Counsel for the Corporation.

1 895

930

LI Bethlehem

523

262

The Chief Executive Officer

BA Dames

613

427

RM Godsell

547

384

AT Kriel

470

422

The CEO’s contract stipulates a notice period of three months. The
contract of the newly appointed CEO expires at the end of 2023.
The CEO currently holds no significant directorship apart fromthe IDC mini-group positions. As indicated above, succession for
the CEO position is in place.

1

SM Magwentshu-Rensburg

791

498

NP Mnxasana

807

541

M More396

282

PM Mthethwa

460

378

ND Orleyn

634

421

NE Zalk--2

	These directors do not derive direct financial benefit from services rendered to
the IDC. Their fees are paid directly to their employers.
	Dr. NE Zalk is employed by the dti and does not earn directors’ fees for services
rendered to the IDC, nor are fees paid to his employer.
3	The increase in amount of fees payable to directors during the financial year
can be directly attributed to establishment of two ad-hoc Committees. The first
Committee was established to assist in the sourcing and placement of a new
Chief Executive Officer of the IDC. This Committee met seven times during theyear. The second Committee was established to review the operations of Foskor
and met six times during the year.
1

2

Further information about the remuneration of directors andsenior managers are provided in Note 26 to the Annual Financial
Statements.

Delegated level of authority
While the Board has the authority to delegate powers to Board
Committees and Executive Management, it remains accountable
to the shareholder. A Board-approved Delegation of Authority
framework is in place, which is reviewed regularly and updated.
Since the last comprehensive revision was done in December
2016, the entire Delegation of Authority document is currently
being reviewed.
The Board has delegated management of day-to-day operations
to the CEO, who is assisted by the Executive Management
Committee and its sub-committees. Each such committee hasa clearly defined mandate set out in written Terms of Reference.
As depicted in the diagram on page 60, specific powers
and authority have been delegated to Board and Executive
Committees responsible for credit approvals. Approval thresholds
are in place for each credit-granting committee.

59Credit granting authority

BOARD

BOARD INVESTMENTCOMMITTEE

SPECIAL CREDITCOMMITTEE onsiders transactions where the transaction is R1.5 billion or more or counterpartyC
exposure is R7 billion or above
The investment is of a strategic natureTransactions where there might be a conflict of interest through an IDC director’s involvement in a transaction (after taking advice from the Social and Ethics Committee,
Board Investment Committee (BIC) and/or Special Credit Committee)
Deviation from any policy relating to a finance transaction (where Board approval isrequired)Counterparty limits of above R7 billion per counterparty at cumulative market value(including undrawn commitments)

 onsiders transactions where IDC’s transaction exposure (new funding plus old ifCwithin a rolling 12 month period) is R250 million or more but less than R1.5 billion andthe counterparty exposure is from R1 billion up to R7 billion
Also reviews transactions where the transaction / counterparty limits are breached,
but recommends these to the Board for approvalDecides on whether a finance transaction is of strategic nature, in which case thetransaction will be reviewed by the BIC, but recommended to the Board for approvalA sector and/or regional limit is breached onsiders transactions where IDC’s transaction exposure (new funding plus old ifCwithin a rolling 12 month period) is R25 million or more but less than R250 million andthe counterparty exposure is below R1 billion
Considers additions/changes to the Delinquent Register onsiders transactions where the IDC’s transaction exposure (new funding plus oldCif within a rolling 12 month period) is less than R25 million and the counterparty
exposure is below R250 million

CREDIT COMMITTEE

60

AN ETHICAL CULTURE
Governing and managing ethics
The Board is responsible for ensuring ethical behaviour within the
Corporation. The establishment of an ethical culture starts withthe example set by the Board and executive management. Ethicalleadership manifests itself in application of and compliance withthe policies, systems and processes of an organisation.
The IDC has a well-developed system of processes and controls
to implement ethics-related risk policies. Our Ethics Policy
Framework consists of:•	The IDC Code of Ethics and Business Conduct, which sets
standards for ethical behaviour within the Corporation and indealing with customers, suppliers and service providers•	The Fraud Policy that communicates a zero tolerance forfraud, theft or corruption to all stakeholders•	The Procurement Policy that sets ethical standards for anequitable and transparent procurement system•	The Gifts Policy that regulates the receipt of gifts byemployees from clients and suppliers•	
The Whistleblowers’ Policy that sets out procedures for
employees to disclose information about unlawful orirregular conduct as referred to in the Protected Disclosures
Act, 26 of 2000.
Employees, customers and other stakeholders can also use an
anonymous tip-off hotline, administered by an external service
provider, to report unethical behaviour. We use awarenesscampaigns to encourage stakeholders to report any fraudulent,
unethical or corrupt activities. During the reporting period,
19 incidents were reported through the tip-off hotline. We are
dealing with these incidents by subjecting each to a preliminary
assessment in order to determine the veracity of the allegations,followed by a full investigation, if required. The matters reported
mainly relate to the misapplication of funds by IDC clients.

Key focus areas
Given the increasing focus on accountability by our shareholder
and other stakeholders, we conducted an ethics attitude
survey throughout the IDC. Results indicated that employees
want to work for an organisation with business ethics andan organisational culture that align with their own, suppliers
depend on fair and transparent procurement practices andclients insist on fair, ethical and transparent business processes
when approaching the IDC for funding.

Monitoring of ethics
The internal review also revealed a clear commitment to ethics
that are largely rules-reliant. Conflicts of interest, the temptationto accept gifts in excess of the prescribed limit and fraudulent
behaviour by employees, suppliers and business partners are,however, ever-present threats that policies and rules may not
manage effectively.

Future focus areas
In the final evaluation, we have concluded that the IDC’s policy
framework is adequate as a basis for ethics compliance. The
challenge is to move away from a compliance-based approachto ethics, in favour of an aspirational approach. Going forward, we
will continue to prioritise ethical business conduct in all we do.

Ethics in procurement
As an entity in the financial services industry, the IDC’s
procurement budget is small when compared to those of someother state-owned entities. Procurement is a vital indicator of anorganisation’s ethical culture.
The IDC has a Procurement Policy that promotes a fair, equitable,transparent, competitive and cost-effective procurement systemaligned with Section 217 of the Constitution of the Republic ofSouth Africa. Our established Procurement Committee monitors
adherence to the highest ethical standards in all our procurementtransactions. Members of the Procurement Committee and allother persons involved in the procurement process are required
to sign a Declaration of Interests Register at every committee
meeting where bids are evaluated and proceedings are
adjudicated.

Procurement and the Code of Ethics and BusinessConduct
Our Code of Ethics and Business Conduct governs businessconduct and deals specifically with matters such as conflictsof interest, gifts and relationships with service providers andcustomers. As standard practice, we conduct risk assessmentson all entities recommended for procurement contracts andbackground checks on all bidding entities and their shareholders.
These include references to suppliers listed on the National
Treasury List of Restricted Suppliers and consideration of court
cases, criminal records, politically exposed persons, credit checks,
media reports and potential business or reputational risk for the
IDC.

Procurement complianceDuring the reporting period, we implemented rigorouscompliance controls for the strengthening of due diligenceprocesses with an emphasis on validating supplier information
received through the procurement process.
Compliance controls are aimed at discouraging supplier fronting
practices and the misrepresentation of information. The IDC’s
Procurement Policy conforms with the directives of the B-BBEE
Act, 53 of 2003, and its Codes of Good Practice. Where we
detect fronting and any related offences, the IDC reserves theright to cancel the contract and claim damages. We also reportsuspected fronting practices to the dti through the office of the
BEE Commissioner. No such cases occurred during the past year.

61

INVESTING IN HUMAN CAPITAL
Enabling a high-performance organisation
The IDC achieves success through the ability of our people
to pursue our strategic intent and fulfil our mandate. We
continuously enhance operational performance by improving
operational efficiencies and the capabilities of our people.
A high-performance organisation is characterised by a culturethat consistently fosters, recognises and rewards performanceexcellence in an environment where our people are engaged,committed and passionate about our purpose. Embedding aworking environment in which employees can thrive and excel
is at the heart of our people strategy.
Our Human Capital division supports the business byadministering its people’s needs and ensuring appropriate
investment in talent development, recognition and retention.
Our Human Capital strategy and operational plans prioritise thefollowing overarching goals:•	To attract, build and retain talent at all levels•	
To develop robust people management and leadershipdevelopment practices•	To enhance and implement our Employee Value Proposition
to ensure an engaged workforce•	To enable and drive a high-performance culture conducive
to productivity•	
To facilitate an environment that enables a diversified
workforce at all levels.

Instilling a high-performance culture
The IDC’s organisational culture is defined by leadershipand employee behaviour that displays the key attributes ofaccountability, responsiveness, collaboration, being proactive,
embracing innovation, integrity and leading selflessly. This isgiven effect by employees who embrace and live our values ofprofessionalism, partnership and passion with a strong customerorientation.
Going forward, we will pursue a progressive people strategy toembed the attributes of a truly high-performance organisationby continuing to focus on the aspects discussed below.
Embedding a culture and work environment conducive toperformance excellence
The IDC‘s ‘People-First’ approach to managing human capitalrests on mutual trust, accountability and high performance.
Recent organisational culture research and robust conversations
with employees indicated low levels of staff morale andengagement. As a result, during the reporting period, we focusedon co-creating corporate and divisional-level culture action plansto address the issues. In the year ahead, we will focus on theimplementation, monitoring and measurement of these actionplans to increase levels of morale.
Aligning the roles and influence of key internal stakeholders to
improve morale and create a positive culture is vital. Additionally,leaders, teams and individuals will be measured on how well

62

they live our values and model the expected key behaviours of ahigh-performance culture. A key focus is the implementation of aculture toolkit to capacitate leaders to drive and facilitate culture
transformation in their teams.
Driving employee engagement and commitment
During the reporting period, we reviewed the IDC’s employee
value proposition to ensure that it remains sufficiently compellingand competitive to attract and retain talent. As a result, we
will enhance the value proposition in the next financial year
to improve levels of employee engagement and increase theircommitment to delivery.
We will measure the increase in employee engagement, formallyfollowing the implementation of our culture transformation plans
and value proposition offerings after a period of approximately 12months after implementation with a tailored yet benchmarked
employee engagement survey.
We will also establish Employee Forums to improve dialogue
between employees and leadership to further improveengagement and communication and foster an environment ofmutual trust, consultation and direct engagement.
This drive aims to ensure that our employees are our ambassadors
and remain committed and connected to our purpose.
Managing, supporting and enabling our talent
Our objective is to capacitate and grow our business by creatinga skilled and talented workforce to fulfil our mandate.
As at end March 2019, the Corporation had a diversified workforceof 846 (2018: 849) employees, indicating a marginal decrease of
0.4% in our talent pool year-on-year. A breakdown of employee
numbers, overall, by race, gender and division is available in the
online version of this report. In total, 68% of our employees are
involved directly in delivering the IDC’s operational objective(client-facing and support), which is consistent with the previous
financial year. We also maintained the capacity in our regionaland satellite offices with a consistent and continued presence tosupport our regional footprint.
The past year also saw the implementation of a comprehensive
talent management strategy with prioritised metrics. We havemade good progress with talent automation as a key enabler inpractically and seamlessly managing talent and talent mobility
across the Corporation.
Managing a succession and business continuity plan for identified
critical roles is another focus area to ensure that sufficient capacity
exists for the Corporation to replace staff in key functions whennecessary. During the reporting period, the voluntary turnover ofindividuals in critical roles decreased from 8.0% to 6.4%.
We also conducted a comprehensive talent review during the pastfinancial year to reconfirm critical roles in line with our businesspriorities and strategies and identify potential successors forsuch critical roles to ensure that the Corporation is continuouslycapacitated. To this end, we have determined the coverage ratio
for the IDC (i.e. the percentage of potential successors identified
at different readiness levels for all critical roles).
Currently, our overall coverage ratio for all critical roles, excluding
executive roles, across all readiness levels, is 68% (2018: 73%). In
the immediate readiness level, the coverage ratio is 62% (2018:64%). In the 1-3-year readiness level the coverage ratio is 78%(2018: 86%) and for 3+ years it is 65% (2018: 69%) of roles that arecovered with identified potential successors.
In the forthcoming financial year, we will focus on goal-directeddevelopment to ensure the retention of high performing
employees and the availability of ‘ready’ talent for our talentmobility requirements. The focus will also be to enhancereadiness levels across all levels.

Staff composition
31 March
2018

31 March
2019

261

261

Male

African (69%)

Male

327

339

African (71%)

Female

27

Male
Male

40

FemaleFemale33

Indian (8%)

Male

34

Female

27
38

Male

32

Female32

71

Coloured (8%)
Indian (8%)

66
Male

White (15%)

MaleWhite (14%)

56

Total

51

FemaleFemale849

846

During the reporting period the focus was on extensive
benchmarking and employee engagement to identify aspects
for our Employee Value Proposition. Aligning the total rewards
offering with our employee value proposition will enhance
engagement and retention efforts, particularly as the review isfocused on the needs of different generational cohorts. This will
ensure our rewards and recognition platforms are competitive,
meet the needs of our diverse generational mix of employees
and provide them with greater choice and flexibility in what is
important to them, while aligning with best practice and market
trends.
Aligned with the outcomes of our employee value proposition,
the focus will be on designing and implementing a suitableretention strategy to attract and retain employees. In the periodahead, we will continue the review of our recognition platforms,
started during the past year, to enhance and align them with ourdiverse employee profile. We will also implement recognition
enablers that talk to the needs and expectations of employees.

Remuneration policy

FemaleColoured (8%)•	Short-term incentives that consist of two components andare awarded when predetermined performance objectives
and targets for the IDC are met. A non-pensionable allowanceis payable at a performance rating of ‘3’ and a performance
incentive at a performance rating of ‘3.5’ and above. All
permanent employees, irrespective of job level, are eligible
to participate.
•	Our long-term, three-year incentive scheme aims to support
employee retention in critical leadership, management
and professional roles. Administrative and support bands
are not included in the long-term incentive scheme. As the
Corporation did not achieve the long-term performancemeasures that inform long-term incentives, this has affected
our recognition and retention efforts.

Talent recognition and retention
The IDC’s remuneration and benefits philosophy is designed
to attract and retain high-performing employees. Our total
remuneration consists of:•	A guaranteed package based on cost-to-company thatconsist of a cash portion and compulsory benefits, such as aretirement fund and medical aid.

Our Remuneration Philosophy and Policy sets out remuneration
practices that aim to facilitate goal-directed and outcomesbased recognition and rewards. The philosophy outlines themain remuneration structure of the IDC, which includes annual
guaranteed pay, variable incentives and benefits payable at thevarious levels. The policy sets out how total remuneration must
be managed and aligned with performance management.
Policy objectives
The main objectives of the Remuneration Policy are to:•	Provide a transparent strategy that aligns rewards andperformance• Promote and position the IDC as an employer of choice•	Facilitate and inculcate a culture of high performance throughfair and equitable remuneration and reward principles•	Ensure internal equity and consistency in the remuneration
practices•	
Provide recognition and reward in line with individual
performance and contributions.
Other remuneration considerations
We concluded a review of the variable pay scheme during the63

financial year to ensure that our reward mix and offering remains
relevant, competitive and supports corporate objectives. In theforthcoming financial year, we will focus on implementation.
The review is a key enabler in ensuring that our reward mix isreviewed periodically in terms of relevance and alignment withbest practice.
The Corporation’s remuneration philosophy aims to drive a
performance orientated culture that recognises and rewards
our people through our variable pay scheme. During the2017 financial year the short-term variable pay incentive wasconditional on the achievement of three key pre-determinedmeasures being: jobs created/saved, disbursements and levelof impairments. Due to the interdependent nature of thesemeasures it is challenging to achieve all three measures. In
addition, it was concluded that a balanced scorecard should not

Number of employees trained by race and gender

raise the importance of certain measures above others outsideof disproportionate weighting. Subsequently the conditional
achievement of these measures was rescinded in October 2018.
A dispute was registered by staff regarding the 2017 incentive
payment that was not effected as one of the conditional measures
was not achieved even though the Corporation achieved theperformance score threshold to result in an incentive payment.
Staff and management engaged and amicably resolved thedispute. In the interests of the Corporation as well at restoringand enhancing the levels of trust and engagement amongst
employees it was resolved to pay employees an amount provided
they were still in the employ of the Corporation as at 15 July 2019and provided individuals met the requirements as per the rules of
the incentive scheme in 2017.

Average training hours by band and gender

15
10

60

5

Coloured375

708

Total number of days training: female

340

799

597

Total number of days training: male

277

629

493

IndianMale

Male

FemaleFemalePercentage of employees trained, by race
9%
9%
13%
69%

Summary of training indicators

White

ColouredIndianAverage number of hours training: female

13

15

12

16

15

13

•

Cover internal permanent staff and CA Trainees•

Have a duration of 1 day or more•

Were offered by external providers (including conferences and short courses)•

Included internal IDC Operations Training•

Included customised programmes delivered in-house

Excluded from these statistics are:

64

2017

Average number of hours training: male
For the purpose of this report, training has been defined as interventions that:

African15.

Support2018

304

Executive

White

14.

Administrative

2019

Total number of employees trained0Professional

Indicator

20

African

13.

0

14

13

15

13

40

12

26

80

Management

100

15.

20

15.

120

17.

25

77

140

15.

Avg. hours

23.

160

8.

134

Number•On-boarding•

Online training

The Corporation manages a provident fund on behalf of all
employees. The total market value of the fund as at 31 March
2019 was R1 031 million. In addition, there is a post-retirement
medical aid benefit for employees who were appointed before
1 March 1997. The number of beneficiaries and the liability has
reduced because of voluntary buy-out programmes. Currently,
there are 143 beneficiaries (2018: 155) with a total liability to the
Corporation of R182.6 million.

Our training plan outlined the number of employees to be
trained in various interventions across the different levels in the
Corporation. This included formal and informal learning that
supports the learning approach adopted in the previous year.
This approach promotes the use of informal methods like on-thejob and social learning over formal classroom learning. Particularsof training provided to employees during the reporting
period are depicted in the graphs on page 64.

Investing in talent and leadership development

The IDC also continued to support the formal studies of
employees through our bursary programme. The percentageof employees supported increased from 15% in 2018 to 20% in
2019. Study fields include Business, Marketing, Law, Finance andDevelopment Finance-orientated programmes. At least 20% of
the funded studies are at Masters level.

The IDC promotes and fosters people development. We provide
employees with an array of innovative, diverse and fit-for-purpose
learning solutions to build the capabilities with which to achieve
our business objectives. We invest in employee development to:• 	Build leadership capability for the Corporation in the short-,
medium- and long-term• 	Support the achievement of the Corporation’s strategic
objectives by developing the required operational, technicaland behavioural competencies• 	Implement function-specific and legislative training to ensurecompliance and the continued promotion of professional
development• 	Build knowledge management capability that supports theretention, transfer and protection of the IDC’s intellectual
property and promotes knowledge sharing and harvesting.
The leadership development strategy was approved during thereporting period. As a key enabler, leadership development
and capacitation are driven through specific initiatives,
including management, mentoring and executive development
programmes and coaching. In addition, employees developed
critical leadership skills to enhance culture alignment by engaging
and driving crucial and difficult conversations and participated in
crucial accountability training in line with our culture vision.

Youth development
During the reporting period, we prioritised providing practicalwork experience to newly-qualified graduates through ourChartered Accountant Learnership and Graduate Internship
Programme. We supported a total of 11 trainees, four of whom
successfully completed the learnership and qualified as charteredaccountants. Twenty interns were also supported during the year
on our two-year Graduate Internship Programme.
Our external bursary programme continues to support talented
and deserving students who cannot undertake tertiary studies
due to affordability. The success rate of individuals undertaking
tertiary studies has increased to 96% (2018: 87%). This can be
attributed largely to our partnerships with tertiary institutions,other funders and personal support through the IDC wellness
offering. Further information on this support is provided in the
online section of this report.

Diversity, transformation and inclusion
The adoption of a development approach supports the use ofexperiential, social and formal learning that is self-directed andaligned with the defined leadership competencies that are
required for our business.
In the coming year, we will undertake a customised, yetbenchmarked, 360° leadership survey to identify areas ofstrength and development opportunities for our leaders in linewith being a leadership brand and developing the ‘DNA’ we are
striving to achieve. The focus for the coming financial year will
be to capacitate leaders in a structured leadership development
academy that provides needs-based leadership programmes
for all leadership levels and will support the building of ourleadership pipeline of potential successors for leadership roles.
During the past year, we reviewed our core operational skills
training along with a detailed skills audit of critical project
development related competencies.
Going forward, we will continue to implement the customised
project development programme, which contains a strong
mentorship focus. We have a pipeline of 15 Business Analysts
in our operational training programme to continuously build
operational capacity.

Development of an intentional and focused transformation
strategy was undertaken with the objective to address ourongoing, positive diversity profile. Diversity is a critical enabler
for the IDC. As a proudly South African state-owned entity,
we continuously strive to ensure that our employee profile
is representative of the broader society. Our overall equity
representation of designated groups increased by 1% to 92.2%(2018: 91.2%). In addition, gender diversity is an imperative
and, as such, 54.4% of all employees are female and 45.6% are
male, while the percentage of people with disabilities remained
constant at 1.5%. In the year ahead, we will focus on implementing
a transformation strategy and programme to enhance the
Corporation’s diversity and inclusivity focus. In addition, we will
pursue a targeted strategy to increase the number of people withdisabilities in our staff complement.
The Corporation also concluded a new three-year employment
equity plan for the period 2019 to 2022 that aims to address
areas of transformation that may still be required at various levels
to ensure representivity in line with the economically active
population (EAP) profile, thereby ensuring a truly South African
entity that embraces and displays transformation as a businessenabler and imperative.

65

ENVIRONMENTAL AND SOCIAL GOVERNANCE
Overview
We subscribe to environmental, health and safety (EHS) practices
aligned with our commitment to sustainable and responsible
development. The Board Social and Ethics Committee oversees
the Corporation’s EHS activities with an emphasis on good
corporate citizenship through the promotion of ethical businesspractices and a commitment to socio-economic development.

Environmental and Social Policy
We apply an Environmental and Social Policy to achieve the IDC’s
strategy, in terms of which we strive to:•	Conform to local statutory requirements and international
best practice standards as the basis for responsible
environmental, health and safety management•	Assist our business partners to improve their environmental,
health and safety performance•	
Utilise resources in an environmentally and socially
responsible manner•	Manage carbon liabilities and exposures while promoting
bankable green projects that foster social responsibilities•	
Promote trade and activities that have minimal adverse
environmental and social impacts•	Monitor the IDC’s impact on the environment andimprove environmental, health and safety performance forinvestments and our activities within the Corporation.

Our focus in the next financial year will be on further improving
the environmental and social performance of clients who
received a ‘poor’ risk category rating. We will also advise oursubsidiaries with environmental legacy projects to improving
their performance overall.

Carbon footprint
The IDC has reviewed its carbon footprint boundary conditions
to include all our subsidiaries. However, only Scope 1 and 2 ofthe greenhouse gas (GHG) emissions inventory of material
subsidiaries have been included in the carbon footprint
calculation. Foskor is a significant contributor to GHG emissions.
The IDC showed a substantial decrease in emission intensity
relative to the base year (by 17%), presumably due to an
improvement in energy consumption efficiency. Scaw Metal
GHG emissions data have been excluded due to its unbundling.
The result has been a large drop in the IDC’s and subsidiaries’
emission data.
Scope 1 and 2
emissions (tCO2e)

Environmental and social due diligence framework
Each due diligence assessment conducted by the IDC includes
an assessment in terms of an environmental and social review
framework that employs a generally accepted system ofclassification of projects according to type, impact and scale.
The types of impact associated with each category are based oncase histories, the likelihood of such impact occurring for certain
industries, the scale of the project and the period over which theactivity will take place.
A classification measuring environmental and social performance,
is assigned per project in the form of a sliding scale (from 1 to 4
with ‘1’ denoting excellent performance, ‘2’ good performance,‘3’ poor performance and ‘4’ unacceptable performance). The
performance of each client and business partner is assessed interms of local legislative requirements.

Environmental and social risk monitoring
Continuous monitoring of our clients’ post-investment activities
contributes to improved environmental and social performanceof the IDC’s business partners. This is especially important amid
the tough economic conditions that can cause some companies
to reduce resources allocated to environmental, health and safety
matters.
During the year under review 58 existing clients were assessed. Of
these clients, 45 received a ‘good’ rating and 13 business partners
were rated ‘poor’. No business partners assessed received an‘unacceptable’ rating.

66

2019

2018

2017

2013
Baseline

The IDC offices

5 025

6 503

5 638

6 220

IDC energy
intensity

6.46

7.66

6.64

7.79

Major subsidiaries1
total

707 984

1 439 150

1 220 663

1 798 586

Total IDC andsubsidiaries

713 0092

1 445 653

1 226 301

1 804 806

Major subsidiaries in 2019 include Prilla, Colibri, Sheraton Textiles, Foskor, and sefa .
Previous years also included Scaw.
2
Excluding Scaw
1

Carbon tax implications
The Carbon Tax Act has been implemented from June 2019.
The Act is a legislative instrument designed to regulate GHG
emissions and foster the transition to a low carbon economy tosupport South Africa’s National Determined Contribution (NDC)
commitments made under the Paris Agreement.
The IDC will be impacted directly and indirectly by the carbon tax
legislation through potentially reduced dividends and income
from some of the business partners in our investment portfolio.
As Carbon Tax is payable irrespective of company performance,
the IDC may be required to fund any shortfall at some of ourdistressed business partners. The IDC’s total greenhouse gas
emissions are far lower to can pay the tax based on the minimum
threshold of 10 MW set in the Carbon Tax Act.
The IDC has embarked on a project to determine a portion ofcomprehensive carbon tax liability risk exposure based on the
Carbon Tax Act.

Occupational Health and Safety (OHS)The IDC’s commitment to a healthy and safe working environment
for all employees, visitors and contractors on site has beenenhanced by the implementation of progressive occupational
health and safety programmes based on the lessons learned
from the benchmarking exercise conducted in 2018. For thesecond year running, no ‘Lost Time Incidents” were recorded. Six
minor injuries were recorded at the head office in Sandton.
To ensure continuous compliance with the Occupational
Health and Safety Act, 85 of 1993 and the Compensation for
Occupational Injuries and Diseases Act, 130 of 1993, the IDC
management will reinvigorate the OHS Committee by ensuring
all the OHS legal appointees (Health and safety Representatives,
Fire Marshals and First Aiders) are available and trained.

Columbus JV: An amount of R13.9 million has been spent
towards the effective management of the Columbus landfill in
Middelburg.

Corporate Social Investment (CSI)
Our CSI programmes, corporate sponsorships and charitablegiving are vehicles through which the IDC contributes towards
socio-economic development and the improvement of qualityof life in disadvantaged communities.

The terms of reference for the OHS committee, Emergency
Response and Incident Reporting and Investigation Procedures
were reviewed during the year to enhance the state of readinessof the Emergency Response Team (ERT) in case of an incident. Ourlast emergency evacuation drill at the head office was conductedin conjunction with the Sandton disaster management andemergency medical services.

CSI priority areas include improving the level and quality ofeducation and supporting income-generating projects aimed atpoverty alleviation through job-creation. The IDC’s CSI strategy
and Sponsorships Policy are aligned to the strategy of the IDC.
More information about the IDC’s CSI initiatives are provided on
page 53 of this report.

Engaging subsidiaries on environmental and social
matters

The IDC’s DIS department provides support to our operational anddeal making units to achieve greater, sustainable impact relating
to the specific developmental outcomes of Black Industrialists,
B-BBEE, youth empowerment, women entrepreneurship,
regional equity, localisation, community empowerment andenvironmental impact.

Dedicated company compliance engagements were held withthe following subsidiaries during the reporting period:
Scaw Metals: The IDC has continued to monitor the
performance of Scaw Metals and three entities formed after
the corporatisation process to ensure compliance with relevant
statutory and regulatory requirements. Scaw Metals has been
granted the environmental authorisation for the cap and closureof the Dimbaza landfill. The cap and closure project is scheduled
for completion by December 2019.
African Chrome: The removal of last source of contamination
at the African Chrome site in Brits was started in April 2019. The
IDC has also spent a total amount of R2.8 million on care andmaintenance of the site.

Development Impact Support (DIS)

More information about our DIS activities are provided on page
52 of this report.

Fraud prevention
Prevention, detection and response to fraud and corruption is
integral to being a responsible corporate citizen. The ways inwhich we deal with these matters are discussed in the Combined
Assurance section, on page 69 of this report.

67

RESPONSIBLE INVESTMENT
The IDC as an Institutional Investor
We believe that businesses must take responsibility for the
impact of their activities on people and the environment. Ethicalinvestment combines the ethical, social and environmental
considerations of investors with their financial objectives. As an
institutional investor, we follow an ethical investment approach,in which we use our investment to bring about positive socialand environmental changes.

Responsible Investment Policy
Our Board has approved a Responsible Investment Policy aspart of the global movement towards incorporating sustainablefinancing into conventional business agendas. The policy
reflects the values of the IDC and identifies activities, listed in
an exclusions list, for which the IDC will not provide funding
based on ethical considerations. Matters listed in the exclusions
list include activities related to the production or trade in arms,
gambling, tobacco and transactions where environmental
impact assessments have not been concluded or geologicalreports are not available.

The Board also approved an additional framework for the IDC’s
financing subsidiaries. Currently, the IDC has one financing
subsidiary, the Small Enterprise Finance Agency SOC Limited(sefa). This framework guides governance in credit approvals byentities that are subject to the PFMA.

TECHNOLOGY AND INFORMATION GOVERNANCE
Digital transformation
The Corporation is undergoing a digital transformation process
to improve and optimise the efficiency and effectiveness of
its business value chain while laying the foundation for 4IR
technologies.
We expect the deployment of high-performance technology
infrastructure, cloud-based services and the strengtheningof IT governance practices in cost containment, service level
management, risk management, project governance andportfolio management to assist the IDC in maintaining its
position as a funding partner of choice.

Strategic initiatives
Implementation of the policy contributes to the preventionof long-term financial, social and reputational risks to the
Corporation.

Subsidiaries and investee companies
We regard the governance of subsidiaries and investee
companies as a critical element of the value creation process. We
accordingly seek to promote good governance practices in all
the entities in which we invest.
The extent of our influence on subsidiaries and other companies
in which we have an ownership share is determined by the sizeof our shareholding in each entity. We have a large measure of
influence over wholly-owned subsidiaries and less influence
over companies where our investment is limited to a minority
shareholding or a loan. As far as we can, we take care to ensurethat all our clients have effective and fit-for-purpose governancestructures in place.
Governance frameworks
As part of its responsibility to govern responsible investing, the
IDC’s Board has approved a Corporate Governance Framework
for IDC Subsidiaries and Investee Companies. The aim of theframework is to establish a uniform governance structure thatenables effective governance oversight and, where applicable,
ownership control.
The framework is a tool for adequate oversight over our
subsidiaries and investee companies. It enables the IDC, as
an institutional investor, to be aware of the material risks andissues that have an impact on our investee companies and theindustries in which they operate.

68

During the year under review, the accomplishment of key
strategic IT initiatives included:•	Installation of agile, scalable, cost-effective and efficientregional server and storage technology infrastructure forhigh-service availability•	Implementation of an integrated enterprise-wide,
unified communications solution for collaboration andcommunications incorporating IP-based voice calling,messaging, video, meeting and team collaboration
functionalities on end-user computing, mobile and desktop
devices•	Strengthening the cyber security and IT governance controlsby minimising and countering potential threats.

Business process optimisation
The Corporation is planning to automate the internal contract
management and business funding application processes as partof the ongoing business process re-engineering and optimisation
programme.

Cybersecurity
An artificial intelligence (AI)-driven cybersecurity technology
solution will be implemented, while hardening the current IT
infrastructure, to strengthen the Corporation’s cybersecurity
posture and comply with prevailing legislation and cybersecurity
governance frameworks.

IT modernisation
We are planning a review and modernisation of the current IT
legacy systems and infrastructure to leverage and extend current
system features, reduce expenditure and maximise the return on
IT investment.

COMBINED ASSURANCE
Combined Assurance Model
The Board and Board Committees promote a common
approach to governance and risk management based on the
IDC’s Integrated Risk Management Framework to support
the Corporation’s strategy. The Integrated Risk Management
Framework sets the standards by which our strategic risks aremanaged.
We adopted a Combined Assurance Model based on theframework that provides assurance about the management of
the Corporation’s key strategic risks. The model is based on thenotion of three lines of defence, as depicted in the diagram
below.

First line of defenceThis involves operational management processes that include
the development of the systems and procedures, management
review, risk ownership and, in some instances, risk and control
self-assessments.
Although this line of defence generally lacks independence
and objectivity, its value comes from those who are close to thebusiness and the day-to-day operations (i.e. line management).
Second line of defenceThis involves those responsible for the oversight of management
activities and is separate from those responsible for delivery, but
not independent of the organisation’s management chain, e.g.
the risk management and compliance functions.

COMBINED RISK MANAGEMENT AND ASSURANCE MODELMANAGEMENTFirst line of defence

1

Ownership of risk and executive review
Policies and procedures (including critical review)
Management review
Periodic self-assessments

INTERNAL ASSURANCE
Second line of defence2

Ongoing monitoring and oversightAssessment of efficiency of operating model
Reporting on exceptions and improvements

EXTERNAL ASSURANCE
Third line of defence

3

Internal audit
External assurance
Independent reporting to those charged with governance

GOVERNANCE OVERSIGHT

Third line of defenceThis relates to independent and more objective assurance about
the adequate design and effectiveness of the IDC’s systems
and controls, governance and risk management processes, andfocuses on the role of the Internal Audit function and otherexternal assurance providers (such as regulatory and supervisory
bodies).

assurance providers within its governance structures. King III
and IV state that a combined assurance model aims to optimise
the assurance coverage obtained from management, internal
assurance providers and external assurance providers about the
key risk areas that affect the organisation. King also indicates thatcombined assurance should be based on identified risks andhow assurance is achieved and reported to the Board.

The mandate and activities of the various lines of defence, i.e.
the Risk Management Department, Compliance and Regulatory
Affairs Department and Internal Audit Department, are explainedin the rest of this section.

Combined Assurance Forum

Combined Assurance Policy
The Board Audit and Board Risk Committees approved a
Combined Assurance Policy in 2018 that was codified from theadopted Combined Assurance Framework referred to above.
Combined assurance integrates and coordinates all assurance
activities by understanding an organisation’s risk exposure and

The Forum is governed by a Charter and its ongoing role isto determine, review and monitor the progress of assurance
activities for 2019 and any remedial actions if required. The Forumcomprises the Compliance and Regulatory Affairs Department,Internal Audit Department and Risk Management Department.
The Chief Risk Officer chairs the Forum.
Focus areas
In 2019, the Forum developed its inaugural Combined Assurance
Plan against the IDC’s strategic risks for the year. The Board

69

Audit Committee and Board Risk and Sustainability Committee
subsequently approved the plan.
We developed a Combined Assurance Dashboard to track thevarious assurance activities against the approved plan. The
various assurance providers, including the Risk Management
Department, Compliance and Regulatory Affairs Department,Internal Audit Department, External Auditors and regulators,
such as the FIC, carried out the relevant assurance activities.
Future focus area
As aligned with the approved 2019 Combined Assurance Plan,
the Forum will present a consolidated report on the outcomesof the various assurance activities to Executive Management andthe Board during 2020.
We will also review the Combined Assurance Policy to ensurethat it remains relevant and aligned with King IV requirements. In
addition, the Forum will seek to implement a software system toenhance efficiencies.

Governance oversight
The primary objective of the Board Committees tasked withoversight of assurance-related matters (the Board Audit
Committee and Board Risk and Sustainability Committee) is toevaluate the effectiveness of the IDC’s Combined Assurance
Model and activities against the identified key risks. The
Committees also review the combined assurance results tosatisfy themselves that appropriate assurance activities, including
operating controls over key risks, are being conducted.

Risk management – second line of defence
Annual risk assessment
The Risk Management Department employs different
methodologies during the risk assessment process to identify
the IDC’s risks. These methodologies vary from one-on-one
interviews, the distribution of surveys and workshops with
the Board, management and employees. During 2019 theRisk Management Department facilitated risk identification
workshops with the IDC’s Divisional Executives, SBU and
Department Heads. The purpose of the workshops was to review
and validate risks listed currently in the IDC’s risk register andidentify any emerging risks.
The risks are captured on an integrated governance, risk
management, compliance and audit software solution. The
system is also used by the Compliance Department and Internal
Audit Department for greater alignment.
Strategic risks
Through our risk assessment process, we identified several
strategic risks that could have a material impact on achieving our
objectives. These risks are shown on page 15.

Operational risk and business continuity
management
Assessments
Given the changing risk landscape, we review the Risk and Control
Self-Assessments (RCSAs) of all the departments annually. The
RCSAs are a key component of the Operational Risk Management

pr is e Ris k Ma n a gemen
r
e
t
t
En

Mission, Vision
and Core Values

70

Strategy andBusiness Objectives

Enhanced
Performanceframework and enable a dynamic and iterative process for
identifying and assessing key operational risks and controls.
Mitigation to proactively address identified control deficiencies
is in place. We review business continuity plans annually andtest critical plans at the work area recovery site to ensure thatthe plans are fit-for-purpose to respond to the occurrence of any
disaster.
Focus areas
We incorporated the Operational Risk Management (ORM)
function into the existing Business Continuity Management(BCM) Forum as the oversight body for operational risk activities.
The Forum comprises representatives from the Compliance,
BCM, Internal Audit, Facilities Management, Risk Management,
Information Technology, Corporate Communication & Marketing,
Environmental Health and Safety departments, representatives
from operations, the CRO (chairperson) and the Human Capital
Divisional Executive.
RCSA results, received per division from all departments andstrategic business units that contain key operational risks inexcess of the levels set by key risk indicators, as well as actionplans and operational loss incidents/events, are reported to the
BCM Forum for deliberation and recommendations to the IDC’s
Executive Committee.
We provided operational risk and business continuity training to
all risk champions to update the RCSAs and business continuity
plans for their respective areas. The purpose of the training was
also to embed a sound risk ownership culture in the Corporation.

Credit Risk Management
Credit risk processes
Our credit and investment risk management process is wellentrenched and entails robust engagement with various internal
departments and stakeholders. Our core credit risk processes
consist of:•	
A multi-disciplinary due diligence team with financial,marketing and technical skills and operational support
resources that include the Legal, Environmental, Health and
Safety, Fixed Asset Valuations and Credit Risk Management
departments•	An independent credit and investment risk assessment by
the Risk Management Department•	
Credit approval committees that include the executive
management team, external members and independent
non-executive directors•	
Our Post-Investment Management Department, which
manages the portfolio from the first disbursement until final
settlement. A dedicated and experienced team is assigned
to monitor and manage the IDC’s subsidiaries and significant
investments•	A Workout and Restructuring Department that manages theaccounts of clients under restructuring and supervision.
The Risk Management Department, under the leadership of the
Chief Risk Officer, reports to the Executive Committee and theBoard Risk and Sustainability Committee on a quarterly basis on
the overall performance of the IDC’s portfolio, including the keyrisk metrics such as concentration risk, breaches of prudential
risk limits, impairments, non-performing loans and arrears.
The key drivers of the movements are highlighted and, whereappropriate, remedial action is proposed. The credit risk metrics
are monitored as part of the key risk indicators in the strategicrisk register.
Impairments
The Corporation adopted the IFRS 9 standard during thereporting period for the first time and reliably quantified theimpact of the implementation.
The 2019 financial year was a challenging period for our clients,
who were affected negatively by macroeconomic conditions.
These conditions included a weakening rand, weak consumer
demand and an uncertain political environment. The protracted
subdued economic growth derailed the turnaround strategies
of some material exposures that could have been resolvedin a economic and political climate conducive to growth. In
addition, some of the projects that we invested in in the restof Africa suffered from implementation delays that resulted in
impairments.
The level of impairments rose from R14 billion in 2018 toR15 billion in 2019, which increased the impairment ratio from
17.4% to 28.4%. The increase in the ratio was due to the firsttime adoption of the IFRS 9 standard and associated earlier
recognition of impairments on commitments and guarantees,
as well as the reclassification of some equity type instruments as
debt. The impairment charge to the income statement reached
R4.8 billion in 2019.
Non-performing loans
The non-performing loans (NPL) ratio increased from 22% in2018 to 24% in 2019, with a similar trend noted in the level of
total arrears. The level of NPLs remains an area of concern and
we are implementing client-specific interventions to remedy
the non-performing. There are some high-value exposures that
had migrated into the NPL category and due to their inherent
complexities, the projected timeline for a suitable resolution has
taken longer than expected.
High-risk exposures
Our high-risk exposures are managed through a watchlist
process that includes our material investments. The processserves as an early-warning indicator for material, currentlyperforming exposures that may be at risk of migrating into thenon-performing category.
Future focus areas
We increased our focus on managing asset quality to protect
the IDC’s balance sheet, as it will act as an enabler for thecompetitive borrowing of funds on the capital markets and for
the Corporation to further entrench its developmental impact.
We are currently reviewing the prevailing risk appetite levels andthis will remain an area of priority to ensure compliance with71

the Corporation’s risk appetite and align business activities withapproved risk appetite levels.
Liquidity Risk Management
Liquidity risk is governed by the Liquidity and Liquidity Risk
Premia Policy. The Asset and Liability Committee (ALCO) provides
the objective oversight and makes delegated decisions within
the Board-established prudential guidelines and policies that
relate to liquidity risk exposures.
Liquidity stress testing
The IDC uses liquidity coverage ratios (LCRs) to test liquidity stress.
The LCRs are used to weigh potential liquidity outflow exposures
under stressed scenarios (net stressed outflows) against theavailable counterbalancing capacity (available high-quality liquid
assets). The stress scenarios are aligned with the Corporation’s risk
profile and take into account that currency convertibility and theability to raise funding, including foreign currency funding, is notguaranteed.
Early warning indicator methodology
The IDC’s early-warning methodology is based on a set of earlywarning indicators (EWIs) that are considered appropriate for
the Corporation. As such the Red, Amber or Green status (RAG
status) of each indicator is tracked using both quantitative andqualitative trigger levels that indicate:• Green: Business-as-usual• Amber: Potential liquidity problems that currently do notthreaten the IDC’s financial standing• Red: Potential liquidity problems that may threaten the IDC’s
financial soundness.
Contingency Funding Plan
The IDC’s Contingency Funding Plan (CFP) aims to mitigate, as far
as possible, the impact of liquidity stress on the IDC mini-group.
The CFP has established a robust and operational governanceframework to:• Link liquidity stress testing and contingency planning• Articulate mechanisms for monitoring early warning signs• Itemise the IDC’s contingency funding sources• Define CFP escalation processes•	Outline responsibilities for managing the Corporation
through a liquidity stress•	Identify the names and contact details of people instrumental
in implementing the CFP.
As the delegated authority accountable for managing liquidity
risk, ALCO is responsible for managing the Corporation through aliquidity stress event. Operationally, the heightened management
information required by the committee, as well as the execution of
approved management actions primarily involves daily liquidity
management (Corporate Treasury Department), funding liquidity
management (Corporate Funding Department) and liquidity risk
management (Risk Management Department).
We arrange liquidity crisis simulation workshops at least annuallyand the identified shortcomings are incorporated into the CFP.

72

Compliance – second line of defence
Governing and managing compliance
The Board Charter requires the Board to ensure ethical behaviour
and compliance with all relevant laws and regulations and audit
and accounting principles, including Codes of Conduct. Whilethe implementation of compliance management within the
Corporation has been delegated to management, the Board
monitors and reviews the processes for compliance with key
regulatory and legal requirements through regular reports to theSocial and Ethics, Audit and Risk and Sustainability Committees.
The IDC’s Compliance and Regulatory Affairs Department
performs the day-to-day compliance tasks and assists theBoard in creating an enabling environment for establishing an
ethics-based compliance culture. The Department also assists
the business units to identify and assess the regulatory risks
applicable to the various operations and develop compliance risk
management plans to mitigate and control them. Regulatory risks
are monitored continually and reported to relevant stakeholders.
Key focus areas
During the year under review, the Board oversaw the
implementation of processes and controls to meet therequirements of the newly promulgated Financial IntelligenceCentre Amendment Act, 1 of 2017. This supports the primaryobjective of the Act to establish a stronger anti-money launderingand combating of terrorist financing regulatory framework
by enhancing the customer due diligence requirements ofaccountable institutions.
We adopted a risk-based approach to customer due diligence inaccordance with the requirement that accountable institutions
should identify, assess and understand its anti-money launderingand combating of terrorist financing risks, as this will allow for amore efficient classification of its clients in terms of high, medium
and low risk.
Other initiatives during the past year included the heighteningof awareness in respect of the Public Finance Management Act,
1 of 1999 (PFMA), the Protection of Personal Information Act, 4of 2013 (POPI), the Promotion of Access to Information Act, 2 of2000 (PAIA).
Monitoring of Compliance Management
The IDC’s Internal Audit Department conducts annual reviews
to monitor the effectiveness of compliance management in
the Corporation and reviewed the Anti-Money Launderingand Sanctions framework during the reporting period. The
Compliance Department continues to remediate the Internal
Audit Department’s recommendations in this regard.
Future focus areas
Implementing the anti-money laundering control and sanctions
programme is a specific current and future focus area. We arealso considering the automation of the IDC’s client management
process (i.e. both client on-boarding and post investment
monitoring).

Internal Audit – third line of defence
Governing and managing Internal Audit
The IDC’s Internal Audit Department provides independent,
objective assurance to the Board that the governance processes,
management of risk and internal control system are adequate
and effective in mitigating the most significant risks that threaten
the achievement of our objectives.
The Internal Audit Department is part of the Corporation’sEnterprise Risk Management Framework as the third line ofdefence. The purpose, authority and responsibilities of ourInternal Audit Department are set out formally in a charter
approved by the Board Audit Committee.
An independent quality assurance review of the Internal Audit
Department was conducted during the period under review, as
required by the Institute of Internal Auditors. The Department
received a ‘General Conformity’ rating, which is the highest
available rating.
Key focus areas
The Internal Audit Department implemented a risk-based internal
audit plan, based primarily on the Risk Registers compiled by
the Risk Management Department (RMD), as well as the IDC’s
Corporate Plan and other key emerging risks highlighted by theExternal Auditors and Internal Audit experts, to fulfil its mandate.
In addition to the internal audit plan, the department also hasa dedicated team responsible for dealing with forensic matters.
The IDC maintains financial and operational systems of internal
controls to fulfil its responsibility of providing reliable financial
and performance information. These controls are designed toprovide reasonable assurance that transactions are concludedin accordance with the laws and regulations and delegation
matrix and that assets are protected adequately against material
loss and recorded fully and correctly. The design of the control
environment architecture was adequate to manage identified
risks effectively, apart from the Business Support Expert Panelprogramme that required significant improvement. Management
is committed to enhancing the control environment.
We report the status of actioning audit findings to the Board
Audit Committee every quarter. As at 31 March 2019, a total of
128 audit findings had been resolved during the past financial

year and 25 remained open, of which seven were overdue.
Generally, the delay in resolving overdue findings is due mainly
to dependencies on external service providers and user-testingof the enhanced IT systems. However, management is driving
an initiative to resolve all previously reported audit findings
timeously.
The Internal Audit Department also provided fraud awarenesstraining and education to our business units, departments,
regional offices and four Exco members. In total, 182 employees
received face-to-face training. Internal Audit provided all IDC
employees with printed copies to increase their awareness about
financial crime. The department distributed the same training
material to 720 business partners.
We are seeing a greater awareness of crime among clients andemployees, possibly due to the awareness campaigns. The
number of cases reported during the past year compared to theprior year decreased, with 12 cases reported for investigation(2018: 30). Three of these related to internal matters and nine tobusiness partners.
Key operational areas are investigated for corruption risks. Fiveout of 16 (31%) high risk areas were assessed during the year.
Future focus areas
The Internal Audit Department submitted a proposal in
March 2019 for consideration by Exco to implement a GroupInternal Audit Forum (the Forum) comprising Internal Audit
representatives from the IDC and its subsidiaries. The proposal
will be tabled at the Board Audit Committee in the 2020 financial
year for final approval. The Forum will aim to improve knowledge
sharing and implement lessons learnt from across the Group,
including those from current audit and forensic practices, norms
and methodologies. This will assist in establishing a standard
approach to our audits and forensic investigations to serve theneeds of the Group.
The department also keeps abreast of other key developments inthe profession, such as the disruptive nature of Fourth Industrial
Revolution technologies as well as Cyber Security and Cloud
Computing risks. We are well aware of these ‘Audit Hot Spots’and will continue to provide the required level of assurance andvalue-adding services to all our stakeholders.

73

BOARD COMMITTEE REPORTS

Board Human Capital and Nominations Committee(HCNC)

Board Investment Committee (BIC)The HCNC assists the Board to develop the Corporation’scompensation policies, plans, performance goals and specificcompensation levels. The Committee annually manages
the Board’s evaluation of the performance of the Chief
Executive Officer and assists the Board in fulfilling its oversight
responsibilities regarding people-related matters to ensuring arobust and focused people agenda for the Corporation.

The Board Investment Committee is a credit-granting committeethat considers transactions which, before the establishment of
the Committee, would have vested in the Board. Aligned with the
IDC’s Delegation of Credit Approval Authority, the BIC considers
transactions where the IDC’s transaction exposure is R250 million
or more but less than R1.5 billion and counterparty exposure
is between R1 billion to R7 billion. We submit transactions thatexceed these limits to the Board for approval.
The Committee also reviews transactions that breach thetransaction or counterparty limits and considers transactions of astrategic nature, for recommendation to the Board. Transactions
that breach sector or regional limits are also referred to theCommittee.
Activity
In addition to ordinary business as indicated above, we met jointlywith the Board Risk and Sustainability Committee to review thebusiness operations of Foskor prior to the establishment of an
ad-hoc committee for this purpose.
We also considered a number of reports on the industries
in which the IDC operates. Most notably, we reviewed the
Corporation’s exposure to the coal mining industry from a
concentration risk perspective and provided comments on how
sustainable coal exposure levels could be maintained within
the IDC’s risk parameters. In our contribution, the Committee
focused on multiplier Board effects that would emanate fromcoal investments for small BEE entities that offer related services
in the value chain. We requested further work be done to analyse
the potential for development and the exploitation of overlaps
between related sectors.
The Committee’s total funding approval of more than R10.5 billion(inclusive of guarantees and amendments to existing facilities)
in 21 transactions contributed significantly to the Corporations’overall funding approvals during the period under review. Detailsof these and other transactions are provided throughout thisreport. These transactions are expected to create 3 826 jobs, with
2 174 jobs expected to be saved.
I would like to thank management and employees for theircontinued commitment and hard work in making these larger
transactions a reality in a tough economic climate.

We place a special emphasis on aspects that drive leadershiptransition and succession planning, as well as overall remunerationand human resource policies for all IDC employees.
Terms of Reference
The Committee is guided by its Terms of Reference, which arereviewed regularly. The most important responsibilities of theCommittee are to:•	Recommend key performance indicators and evaluate andrecommend the Corporation’s performance to the Board•	Recommend the appointment of non-executive directors,
including independent non-executive directors to the Board
for consideration by the shareholder•	Recommend the appointment of directors to the boards of
key subsidiaries and investee companies for consideration by
the Board•	Recommend the appointment of the CEO to the Board andset the criteria to evaluate the performance of the CEO•	Assist the CEO in setting criteria to evaluate the performanceof individual Executive members in the discharge of theirfunctions and responsibilities and evaluate performance inrelation to corporate goals•	Review the performance of the CEO and determine his salary
based on the evaluation of his performance and taking into
account market related imperatives•	Oversee the setting and administering of remuneration at alllevels of the Corporation•	Oversee the establishment of remuneration strategies andpolicies to promote the achievement of strategic objectives
and encourage individual performance•	Review remuneration policy implementation outcomes toensure that set objectives are being achieved•	Ensure that the mix of fixed and variable pay, in cash andother elements, meet the Corporation’s strategic objectives.

Conclusion
As a Committee we are satisfied that we have fulfilled our
responsibilities in accordance with the Terms of Reference of theBoard Investment Committee for the reporting period.

Activity
During the year under review, the Committee supported theBoard in identifying and appointing the CEO to replace Mr
Qhena, who resigned from the Corporation during the year.
We also ensured that the performance objectives of the CEO,
Executive and the Corporation are aligned with the required
strategic outcomes.

Dr SM Magwentshu-Rensburg
Chairperson of the Board Investment Committee
29 July 2019

We reviewed and approved the corporate short-term and longterm performance targets. The Target Setting and Performance
Assessment Committee, consisting of internal members and an
external member, assisted by providing assurance on targets andperformance information.

74

The Committee provided continued oversight over the
implementation of the Corporation’s Remuneration Philosophy
and Policy as reported on in the Human Capital section of thisIntegrated Report. We considered enhancements to the policy
to drive and enable talent recognition and retention efforts.
The Board also guided the Corporation and supported theculture transformation initiative aimed to create a more enabledworking environment.
We considered reports on the IDC’s Employment Equity and Skills
Development plans, the nature of the Executives’ employment
contracts and key policies to ensure Corporate robustness. The
main focus of the polices are to manage secondments, sexual
harassment and the Corporation’s integrated talent management
and succession strategy. As a Committee, we engaged on
executive leadership assessments and a development approachthat is aligned with our approach of talent recognition andimplementation.
Future focus
Our efforts to enable a high-performance culture and facilitateand entrench leadership capacitation and development is an
ongoing priority. As a Committee, we remain mindful of theneed to retain our talent through an enhanced employee value
proposition that includes the continued alignment of the IDC’s
total rewards strategy. The onboarding, transition and alignmentof the new CEO is a priority. The focus in the year ahead will be tosupport management in resolving employee concerns that havebeen raised formally with the Board.
Conclusion
During the year under review, there were no deviations from theRemuneration Policy and we are satisfied with the Corporation’s
compliance in this regard. As a Committee, we are satisfied that
we have fulfilled our responsibilities in accordance with theTerms of Reference of the Board Human Capital and Nominations
Committee.

Board Audit Committee (BAC)
Report of the Board Audit Committee in terms of Regulations
27(1)(10)(b) and (c) of the Public Finance Management Act
of 1999 (as amended) and requirements of King IV Code ofGovernanceBackground
The Board Audit Committee (BAC) oversees the Corporation’s
financial reporting process on behalf of the Board of Directors,
specifically with regard to evaluating the adequacy and efficiencyof accounting policies, internal controls, risk management andfinancial reporting processes. In addition, the BAC assesses theeffectiveness of the Internal Auditors and independence andeffectiveness of the External Auditors.
The Corporation’s management has primary responsibility for thefinancial statements, for maintaining effective internal control
over financial reporting and assessing the effectiveness ofinternal control over financial reporting.
Responsibilities, composition and functions of the Committee
The Committee’s role and responsibilities include its statutory
duties according to the Public Finance Management Act of1999 (as amended), the requirements of the King IV Code ofGovernance, the Companies Act, 71 of 2008 (as amended) andthe responsibilities assigned to it by the Board.
As a Committee, we report that we adopted the appropriate
formal Terms of Reference as approved by the Board and aresatisfied that we have discharged our responsibilities according
to the Companies Act, King IV and PFMA.
The Committee carried out its functions through attendanceat Audit Committee meetings and discussions with executive
management, Internal Audit, external auditors and external
advisors where appropriate.
We meet at least four times per annum, with the authority toconvene additional meetings as circumstances require.

Mr BA Dames
Chairperson of the Board Human Capital and Nominations
Committee
29 July 2019

In executing its key functions and discharging its responsibilities
as outlined in its Terms of Reference during the period underreview, the Committee:•	
Assisted the Board of directors in its evaluation of theadequacy and efficiency of the internal control systems,
accounting practices, information systems, risk management
and auditing processes applied within the Corporation in the
day-to-day management of its business•	
Facilitated and promoted communication between the
Board, management, the external auditors and Internal Audit
Department on matters that are the responsibility of theCommittee•	Introduced measures that, in the opinion of the Committee,
may enhance the credibility and objectivity of the financial
statements and reports prepared with reference to the affairsof the Corporation (and the IDC Group)•	Nominated and recommended for appointment of registered75

auditors, SNG Grant Thornton and Ngubane & Co, as the
Corporation’s external auditors the firms who, in the opinionof the Committee, are independent of the IDC•	Approved the fees to be paid to the external auditors and theauditors’ terms of engagement•	
Ensured that the appointment of the external auditors
comply with the Companies Act and any other legislation
relating to the appointment of auditors•	Reviewed legal and compliance matters that could have asignificant impact on the financial statements•	
Monitored internal control frameworks and procedures,
including accounting policies, legislative compliance,
regulatory matters and governance.
Internal control
We monitored the effectiveness of the IDC’s internal controls
and compliance with the Enterprise-wide Risk Management
Framework (ERMF). The emphasis on risk governance is basedon three lines of defence and the BAC uses the regular reports
received from the three lines of defence (process owners/
department heads; Risk and Compliance Departments,
management and Internal Audit Department) to evaluate theeffectiveness of the internal controls. The ERMF places weighton accountability, responsibility, independence, reporting,communication and transparency, internally and with all the
IDC’s key external stakeholders.
No findings have come to the attention of the Committee toindicate that any material breakdown in internal controls has
occurred during the financial year under review. The Committee
is of the opinion that the internal accounting controls areadequate to ensure that the financial records may be relied upon
for preparing the consolidated Annual Financial Statements, that
accountability for assets and liabilities is maintained and that thisis based on sound accounting policies, supported by reasonable
and prudent judgements and estimates. The BAC is further ofthe opinion that the internal controls of the Corporation havebeen effective in all material respects throughout the year underreview.
This opinion is based on the information and explanations given
by management regarding various processes and initiatives
aimed at improving the internal control environment and theintegrity of information, discussions with Internal Audit and the
independent external auditors, on the results of their audits. To
formulate its opinion, the Committee:•	Monitored the identification and correction of weaknesses
and breakdowns of systems and internal controls•	Monitored the adequacy and reliability of management
information and the efficiency of management information
systems•	Reviewed quarterly, interim and final financial results andstatements and reporting for proper and complete disclosureof timely, reliable and consistent information•	
Evaluated, on an ongoing basis, the appropriateness,
adequacy and efficiency of accounting policies andprocedures, compliance with generally accepted accounting
practice and overall accounting standards as well as any
related changes

76•	Discussed and resolved any significant or unusual accounting
issues•	
Reviewed reports supplied by management regarding
the effectiveness and efficiency of the credit monitoringprocess, exposures and related impairments and adequacyof impairment provisions to discharge its obligations
satisfactorily•	
Reviewed and monitored all key financial performanceindicators to ensure that they are appropriate and thatdecision-making capabilities are maintained at high levels•	
Reported to the Board on the effectiveness of the
Corporation’s internal reporting controls.
External auditors
As a Committee, we recognise the importance of maintaining
the independence of the Corporation’s Independent Auditors,
both in fact and appearance. Each year, the Committee evaluates
the qualifications, performance and independence of the
Corporation’s Independent Auditors and determines whether
to re-engage the current Independent Auditors. In doing so,
the Audit Committee considers the quality and efficiency ofthe services provided by the auditors, the auditors’ capabilities,
technical expertise and knowledge of the Corporation’s
operations and industry. Based on this evaluation, the Audit
Committee has retained both SNG Grant Thornton and Ngubane& Co as the auditors.
The Committee, in consultation with executive management,
agreed to the engagement letter, terms, audit plan and audit fees
for the financial year ended 31 March 2019.
The Committee:•	Approved the external auditors’ annual plan and related
scope of work•	Monitored the effectiveness of the external auditors in termsof their skills, independence, execution of the audit plan,
reporting and overall performance•	Considered whether the extent of reliance placed on internal
audit by the external auditors was appropriate and whether
there were any significant gaps between the internal andexternal audits•	Approved the Non-audit Services Policy that specifies thatthe external auditors are precluded from engaging in nonaudit related services.
Financial statements
We have reviewed the financial statements of the Corporation andthe IDC Group and are satisfied that they comply in all material
respects with IFRS and the requirements of the Companies Act
and PFMA. During the period under review the Committee:•	
Reviewed and discussed the audited Annual Financial
Statements included in this Integrated Report with theexternal auditors, the Chairperson, the Chief Executive Officer
and the Chief Financial Officer•	Reviewed the external auditors’ report and management’s
response to the report•	Reviewed any significant adjustments resulting from external
audit queries and accepted unadjusted audit differences

•	Reviewed areas of significant judgements and estimates in
the Annual Financial Statements• Received and considered reports from Internal Audit.

after the Committee reviewed a documented assessment bymanagement of the going concern premise of the Corporationand the IDC Group.

Expertise and experience of finance function
We have considered and satisfied ourselves of the overall
appropriateness of the expertise and adequacy of resources of
the IDC’s finance function and experience of the senior membersof management responsible for the financial function.

Governance of risk
The Board has assigned oversight of the Corporation’s risk
management function to a separate Board Risk and Sustainability
Committee. The Chairperson of the BAC attends the Board Risk
Committee meetings as a member to ensure that information
relevant to these committees is shared regularly.

Duties Assigned by the Board
Integrated and sustainability reporting
The BAC fulfils an oversight role regarding the Corporation’s
Integrated Report and the reporting process and considers
the level of assurance coverage obtained from management
and internal and external assurance providers in making its
recommendation to the Board.
We considered the Corporation’s information as disclosed in the
Integrated Report and assessed its consistency with operationaland other information known to Committee members and forconsistency with the Annual Financial Statements. We discussed
the information with management and considered theconclusions of the external assurance provider.
The Committee is satisfied that the sustainability information is,
in all material respects, reliable and consistent with the financial
results. Nothing has come to the attention of the Committee toindicate any material deficiencies in this regard.
Combined assurance
The Committee is responsible for monitoring the combined
assurance model detailing significant processes, line
management monitoring, Internal Audit and external assurances.
This model is used to assess the appropriateness of assurance
over risks/controls provided to the Board.
Engagement regarding the extent to which the various assurance
providers rely on each other’s work take place continuously and
we are of the view that adequate coordination occurred between
the external auditors and Internal Audit.
A Combined Assurance Policy is in place that integrates Internal
Audit, Compliance and Risk Management Plans and other external
assurance providers. Furthermore, a Combined Assurance Plan
was approved and used to monitor the activities in relation to
the Combined Assurance Process.
During the year, the committee assessed combined assurance
from the external auditors, internal auditors and management,
and ensured that the combined assurance received is adequate
to address all material risks.
Going concern
The Committee concurs that the adoption of the going
concern assumption in the preparation of the consolidated
Annual Financial Statements is appropriate and sound. This is

The Committee fulfils an oversight role regarding financial
reporting risks, internal financial controls, fraud risk andinformation technology risks as they relate to financial
reporting. We are satisfied that the appropriate and effective risk
management processes are in place.
Internal audit
Internal audit forms part of the third line of defence as set out inthe ERMF and engages with the ﬁrst and second lines of defence
to facilitate the escalation of key control breakdowns.
The Internal Audit Department has a functional reporting line to
the Committee Chairperson, an operational reporting line to the
CEO and full access to other BAC members.
The BAC, with respect to its evaluation of the adequacy andeffectiveness of internal controls, receives reports from Internal
Audit on a quarterly basis, assesses the effectiveness of theinternal audit function and reviews and approves the internal
audit plan.
The Audit Committee is responsible for ensuring that the
Corporation’s internal audit function is independent andhas the necessary resources, standing and authority within
the Corporation to discharge its duties. We approved theinternal audit function’s annual audit plan and as a Committee,
monitored and challenged, where appropriate, action taken bymanagement with regard to adverse internal audit findings.
The Committee has overseen a process by which Internal Audit
has performed audits according to a risk-based audit plan
where the effectiveness of the risk management and internal
controls were evaluated. These evaluations were the main
input considered by the Board in reporting on the effectivenessof internal controls. The Committee is satisfied with theindependence and effectiveness of the internal audit function.
Conclusion
Having considered, analysed, reviewed and debated information
provided by management, Internal Audit and the external
auditors, the Committee confirmed that:•	
The internal controls of the group were effective in allmaterial aspects throughout the year under review•	These controls ensured that the group’s assets had beensafeguarded• Proper accounting records had been maintained• Resources had been utilised efficiently77•	The skills, independence, audit plan, reporting and overall
performance of the external auditors were acceptable.
Following our review of the financial statements for the year
ended 31 March 2019, we are of the opinion that they comply
with the relevant provisions of the PFMA, as amended, and IFRS
and that they present fairly the results of the operations, cash
flow and financial position of the Corporation.
We have complied with all the King IV principles and with theinclusion of integrated reporting, as evidenced by this issue of
the Corporation’s Integrated Report for the financial year ended
March 2019. The Committee is satisfied that it has compliedin all material respects with its legal, regulatory and other
responsibilities.
The BAC recommended this Integrated Report to the Board forapproval.

Ms NP Mnxasana
Chairperson of the Board Audit Committee
29 July 2019

Board Risk and Sustainability Committee (BR&SC)
The Board Risk and Sustainability Committee assists the Board incarrying out its responsibilities relating to the management andgovernance of risk. The Committee ensures that the Corporation
has an appropriate risk management strategy and that it is
implemented. The Committee, through Executive Management,
has a responsibility to ensure that adequate risk management
processes and resources are in place to assist the Corporation insetting and achieving its strategic objectives.
During the year under review the Committee deliberated on anumber of important matters, as summarised here:
Risk appetite and concentration limits
We considered a report on the review of the IDC Risk Appetite
Framework and Risk Appetite Statement (RAS). The RAS is a
Board-approved statement that defines the types and aggregate
levels of risk that the Corporation is willing to accept in pursuit of
its business objectives. It informs risk-based decision-making for
the Board, executive management, risk management functions
and the business and operating units. The RAS offers a holistic
approach to control risk exposures and concentrations.
The report highlighted that the impairment ratio at 22.6%(December 2019) exceeded the approved threshold of 20%. The
implementation of IFRS 9 had various implications that affectedcumulative impairment numbers and led to the breach. An IFRS
9 impact analysis study is currently underway., The results will bereported to the Committee during the current financial year.
We condoned the risk appetite metrics that were outside
approved levels and recommended the implementation of anumber of interventions and close monitoring to avoid future
breaches.
Review of non-performing loans
Due to concerns raised by the Board about the alarming increasein non-performing loans, we reviewed these loans to understandthe root causes and provide oversight on the steps taken to
manage the growth. Reasons identified for the increase included:• Macroeconomic conditions (slump in economic activity)•	The IDC fulfilling its mandate to address market failure bysupporting distressed businesses• Poor performance of Rest of Africa investments.
We proposed client-specific interventions that the relevant
management teams are currently implementing.
Operational risk and business continuity review
The Risk Management Department submitted an Operational
Risk and Business Continuity Review Report to the committeethat provided an overview of all operational risk activities
undertaken by the department.
The activities included an update on departmental and business
unit Risk Control Self-Assessments used to formulate and embed
key risk indicators. These assessments have proven to be a very
effective risk management tool.

78

Collection of loss data continues to be a challenge and the risk
management team continues to work on new initiatives toensure improvement.
Corporate treasury limits review
The IDC Board approves corporate Treasury counterparty limits
annually. In addition, authorised dealers who can bind the
Corporation telephonically, are appointed by the Board on anannual basis.
During the year under review, we approved Treasury counterparty
limits by product and nominal capital exposure and considered
yearly criteria for further proposals relating to counterparty limits.
A summary of the principles that the Committee applied inconsidering reports about counterparty limits are given below.
Treasury counterparties are limited to central government,
registered banking entities and selected public entities toensure that primary clients of the IDC do not receive support
from Corporate treasury investments. A fundamental principle
is to remove credit and liquidity risk from cash and near-cash
instruments and we take care to ensure that the principals forcounterparty limit approval comply with PFMA regulations andNational Treasury Guidelines. The nominal quantum of limits is
set to facilitate envisaged or probable business activities in themedium-term.
Board subcommittee on Foskor
During the reporting period, the Board established an ad hoc
committee to continue with the work performed previously by
the BR&SC and the Board Investment Committee in reviewing
the position of the IDC subsidiary, Foskor (Pty) Ltd and deciding
on the way forward for the subsidiary.
I chair the Board Subcommittee on Foskor and am mandated toconsider the appropriate scale and nature of Foskor’s production
profile as highlighted by reports obtained from external
consultants and Foskor’s management, the role of current andfuture equity partners, the socio-economic impact of Foskor andrelevant corporate governance matters.
The Committee met eight times during the year and we are in theprocess of formulating our report, with proposals, to the Board.

Board Social and Ethics Committee (BSEC)
The Committee assists the Board with its duties that relate tooversight of the IDC’s social and ethical matters and setting
strategies to integrate sustainability into the daily businessactivities of the Corporation. The Committee plays an importantrole in managing the Corporation’s exposure to reputational risk
and promotes the ideals of corporate fairness and transparency,social and economic development and good corporate
citizenship.
Ethical leadership
We monitor the IDC’s activities, taking due regard of all relevant
legal requirements in matters relating to social and economic
development, good corporate citizenship, stakeholder
relationships and the impact of the Corporation’s activities on theenvironment, and on health and public safety.
Potential conflicts of interest
During the past year, we considered one report relating toa matter in which an IDC director had a potential conflict ofinterest, as summarised below.
In a transaction referred to as Newco Project SPV, we considered
the relationship between a Board member and Mr K Buthelezi,
who is involved in the project through the Emthunzi Trust, apassive shareholder with a 4% shareholding in the project. Mr
Buthelezi, who is a member of various committees and boards ofstate-owned institutions, was identified as an influential person
in terms of the IDC’s Prominent Influential Persons (PIP) Policy.
In addition, he is a brother of Ms P Mthethwa, a member of theBoard of the IDC. We found that the Emthunzi Trust is a family
trust set up for the immediate family and descendants of Mr
Buthelezi and does not involve Ms P Mthethwa as a beneficiaryor in any other capacity.
We requested an amended report at the next meeting of theCommittee, with more information on a number of aspects.
These include the potential for reputational risk having regard forthe transaction in its entirety and the IDC’s position on funding
trusts, with the emphasis on family trusts.

Conclusion
The Board continues to be concerned about the deteriorationin the asset quality. We identified key indicators to monitor thesituation on a quarterly basis.

Reputational risk
We have an oversight role in respect of reputational risks
emanating from the Corporation’s social and those that arise fromunethical business practices. During the past year we reviewed
the processes and policies that are in place to manage unethicalconduct and behaviour, legal and regulatory compliance risk andcredit and investment risk.

As a Committee we are satisfied that we have fulfilled our
responsibilities in accordance with the Terms of Reference of theBoard Risk and Sustainability Committee.

The Committee is satisfied with the assurance provided on thecomprehensiveness and adequacy of the controls in place tomanage the Corporation’s strategic risks.

Ms LI Bethlehem
Chairperson of the Board Risk and Sustainability Committee
29 July 2019

Compliance
The Committee oversees the administration of the IDC’s Politically
Exposed Persons (PEP) Policy and approves the list of all fundedclients for publication on the IDC website on a quarterly basis.
During the past year, we considered quarterly Anti-Money79

Laundering (AML), Sanctions and Financial Intelligence Centre
Act, 38 of 2001 (FICA) status reports. The IDC had undergonea Financial Intelligence Centre inspection during August and
September 2018. At the time of publishing this report, theCommittee still awaits the Regulator’s report in this regard. We
also approved amendments to the IDC’s Domestic Persons ofInterest and Foreign Prominent Public Official Policy that aims
to align it with the recent amendments to FICA. These changes
relate to the requirement for institutions to assign prescribed risk
measures to PIPs according to the categories identified in the
new FICA definitions.
No material non-compliance with legislation and regulations or
non-adherence to codes of best practice, relevant to the areas
within the Committee’s mandate, was brought to the BSEC’s
attention.
Oakbay Resources
The Board delegated oversight of the collections and other legal
processes instituted by the IDC against Oakbay Resources to the
BSEC.
The litigation instituted by the IDC, claiming arrears amounting toR37.5 million and payment of an amount of R250 million, which
had been converted into equity, is ongoing. Our goal is to ensurethat the IDC’s reputation is maintained and protected and thatthe matter is pursued to its fullest extent as provided for in law.
We receive progress reports on this matter at every Committee
meeting.
Stakeholder relations
The Committee discussed a report outlining the various
initiatives undertaken by the Corporation to improve customers’interface and experience. Key focus areas were greater efficiency
in managing existing customer accounts to promote repeat
business, as well as a special focus on service-related complaints
and the creation of a personalised and differentiated service
offering. We requested management to investigate the reasonsfor the apparent increase in the number of customer complaints
compared to the previous year and will discuss their report,
together with the results of a planned independent customer
satisfaction survey, at an upcoming meeting of the Committee.
We also considered an Employee Relations report dealing
with matters such as the Corporation’s compliance status in
relation to relevant labour and employment legislation, theInternational Labour Organisation’s Protocol on Decent Work andWorking Conditions, employee relations and the Corporation’scontribution towards the educational development of its
employees.
We noted that key focus areas from an employment equity
perspective pertained to ensuring that employment targets
for people with disabilities and female senior managers are
met. Skills development initiatives to support the Corporationin fulfilling its mandate included leadership development andoperational, functional and behavioural skills development for
employees, including a bursary scheme for the formal educationand development of employees.

80

Broad-Based Black Economic Empowerment
During the 2019 financial year, the Corporation achieved an
audited Level 4 Broad-Based Black Economic Empowerment(B-BBEE) rating as calculated in terms of the amended Specialised
Financial Services Sector Codes (FSC), compared to the audited
Level 2 B-BBEE score in the previous year when the Generic Codewas applied. The rating was based on measurements against
four scorecard criteria, namely Management Control, Skills
Development, Enterprise and Supplier Development and SocioEconomic Development.
The IDC’s key area of underperformance was in procurementfrom Qualifying Small Enterprises (QSEs) and Exempt MicroEnterprises (EMEs), due to the fact that a significant portion of
the IDC’s procurement expenditure related to interest paid tocommercial banks and fund managers who do not qualify as
QSEs and EMEs. This type of procurement cannot be obtained
from QSEs and EMEs.
We are of the view that the existing FSC codes are aimed atcommercial banks and as such, inappropriate for Development
Finance Institutions (DFIs). We are engaging with the verification
agencies to obtain a second opinion on the exclusion ofinterest paid in the calculation of total measured procurement
expenditure and have applied to the Department of Trade andIndustry for the exclusion of such interest. We are also engaging
with the Financial Sector Transformation Council through ourmembership of a working committee representing DFIs with theobjective to establish a DFI-specific B-BBEE scorecard.
We believe that, in this way, the contribution that the IDC is alreadymaking towards driving transformation in large firms and building
expertise in small and medium black-owned professional firms in
the procurement of legal, marketing and facilities management
services will be recognised. The IDC currently spends an averageof R200 million per annum on such services.
Mining Charter
We responded to a request by the Department of Mineral
Resources (DMR) to make suggestions and recommendations on
strengthening or improving various elements of the draft 2018
Mining Charter.
Our recommendations were based on the overarching principlethat from the IDC’s perspective, there must be meaningful
participation by black people in the mining industry and that theindustry must remain relevant, profitable and with the ability toprovide jobs. We have highlighted the need for the Mining Charterto address market exigencies, commented on the deviation in theassessment of compliance with the requirements of the previous
Mining Charter between the DMR and the Chamber of Minesand expanded on a suggestion relating to the transformationof the mining industry through housing and living conditions tofacilitate community development.
Social development
We considered a Corporate Social Investment (CSI) activity
report setting out particulars of money spent on a number of

CSI initiatives, mostly in respect of youth and women. As partof the Nelson Mandela centenary projects, IDC employees
participated in the renovation of selected facilities at Sterkfontein
Psychiatric Hospital and the IDC contributed R5 million towards
the conversion of the house of the late President Nelson Mandela
in Houghton into a Presidential Centre.
The Committee discussed a Community Development reportthat highlighted the IDC’s plans to enhance its development
impact and related challenges. The IDC’s main objective here isto assist operational and deal-making business units to achieve
greater impact through specific developmental outcomes,
such as Black Industrialists, B-BBEE, youth empowerment,
women empowerment, regional equity, localisation community
empowerment and environmental impact and to assist targetedgroups to participate in the main stream economy.
Sustainable Development
We reviewed the IDC’s Environmental, Health and Safety (EHS)
risks as they pertain to its subsidiaries and business partners.
The main risk factors identified related to non-compliance with
EHS regulations, pollution and social issues, such as community
disputes and occupational hazards. We are concerned by thesignificant number of IDC funded business partners who do notcomply with EHS regulations and support the current efforts of
the IDC’s management to assist them to become compliant.
We expect a significant number of IDC-funded business partners
to be impacted by the implementation of the proposed carbon
tax and the IDC is adopting a holistic approach to managing
the risks emanating from the Corporation’s exposure to carbon
emission-intensive industries.
Conclusion
As a Committee we are satisfied that we have fulfilled our
responsibilities in accordance with the Terms of Reference of theBoard Social and Ethics Committee for the reporting period.

Adv ND Orleyn
Chairperson of the Board Social and Ethics Committee
29 July 201981

ENSURING FINANCIAL SUSTAINABILITY
are feeling the strain of the unfavourable economic environment.
The Group made a consolidated profit of R720 million compared
to a profit of R841 million in 2018 excluding capital profits. The
IDC funding model includes exiting mature investments to fundnew business. Although the IDC realised capital profits fromthese exits, with the adoption of IFRS 9 the consolidated profit of
R720 million excludes capital profits of R2 280 million as we haveelected not to recycle these as profits on exit.

The IDC is a going concern. Due to the current state of theeconomy we expect profitability to be under pressure in the
short- to medium-term. Our efforts to ensure sustainable
development in the South African economy require that the
Corporation remains financially sustainable.
We have sufficient liquidity to meet our current obligations andare confident that, for the foreseeable future, we can raise enoughfunding through a combination of new debt and internallygenerated funds (profits, repayments on existing facilities or
equity divestments) to invest in new advances into the economy.
Managing impairments is key to ensuring our financial
sustainability. We adopted IFRS 9 in the year under review and theforward looking approach of the accounting standard resulted inincreased provision requirements, highlighting the IDC’s role asa development finance institution as well as the countercyclicalrole the organisation has played in the economy. We have, andwill continue to review and implement initiatives to ensure that
impairments remain within our risk appetite.

Group revenue
Group revenue for the year has increased by 26% to R17.9 billion
from R14.2 billion in 2018. The 2018 revenue excluded Scaw (Pty)
Ltd’s revenue which was disclosed as a discontinuing operation.
If Scaw’s revenue from 2018 was to be included, Group revenue
would have increased by 2%. Interest income for the Groupof R4.5 billion is 33% higher than the prior year. The improved
repricing initiative also had a positive impact on the improved
interest income.
Dividends received were 17% higher compared to the previous
financial year. In 2019 the IDC received a dividend from Kumbaof R1.3 billion, while Sasol and BHP paid R735 million and R740
million, respectively. Palabora Mining Company contributed
R200 million to the dividend income.

The Board has emphasised that, in order to implement the 2020-2024 Corporate Plan and all the approved initiatives, we need toremain a going concern and financially sustainable.
As a result, the IDC regards financial sustainability as a material
matter.

The IDC has seen much progress in the introduction of Strategic
Equity Partners (SEPs) in Scaw, which had incurred significant
losses over the years. In response to Scaw’s performance, IDC
decided to introduce SEPs in the key Scaw divisions, who would
provide necessary financial and focused technical support
to the divisions and assist with turning around their financial
performance. Following a positive feasibility study to determine

REVIEW OF FINANCIAL PERFORMANCEThe 2019 financial year was challenging for the South African
economy as the appetite for business expansion was relatively
low. Most of our subsidiaries and certain associated companies

Five-year financial overview – extract from the Company’s annual financial statements
Five-year overview extract from the Company's annual financial statements
Figures in Rand million

2019

2018

2017

2016

2015

Statement of financial position
Cash and cash equivalents
Loans and advances
Investments
Property, plant and equipment
Other assets

9 233
27 932115 857
58
2 374

5 726
28 564105 959
54
1 671

6 660
25 095100 329
54
1 789

6 183
23 45191 430
166
1 195

7 714
21 76094 198129
1 348

Total assets

155 454

141 974

133 927

122 425

125 149

Capital and reserves
Other financial liabilities
Other liabilities

93 09754 1258 232

87 78546 7237 466

83 82542 5537 549

78 00038 9875 438

84 86033 566
6 723

Total equity and liabilities

155 454

141 974

133 927

122 425

125 149

Statement of comprehensive income
Operating profit/(loss)
Income from equity-accounted investments

(824)
-

1 892
-

1 601
-

152
–

1 718
3

Profit before taxation
Taxation

(824)
354

1 892
201

1 601
194

152
25

1 721
(54)

Profit/(loss) for the year

(470)

2 093

1 795

177

1 667

82

Five-year financial overview – extract from the Group’s annual financial statements
Five-year overview extract from the Company's annual financial statements
2019

2018

2017

2016

2015

Statement of financial position
Cash and cash equivalents
Loans and advances
Investments
Property, plant and equipment
Other assets

9 809
25 88093 072
7 343
8 503

6 156
30 66081 4888 148
10 5067 699
25 80278 266
12 3845 685

6 865
23 92871 586
10 6268 343

8 257
22 41273 1149 921
8 585

Total assets

144 607136 958

129 836

121 348

122 289

Capital and reserves
Non-controlling interest
Other financial liabilities
Other liabilities

95 602(299)
39 4869 818

88 09784
33 217
11 63488 097193
30 367
11 17984 717102
27 9848 545

89 797125
24 005
8 362

Total equity and liabilities

144 607136 958

129 836

121 348

122 289

Statement of comprehensive income
Operating profit/(loss)
Income from equity-accounted investments

(498)
644

2 962
419

978
963

(494)
557

1 011
656

Profit before taxation
Taxation

146
574

3 381
381

1 941
621

63
160

1 667
(14)

-

(538)

(362)

720

3 224

2 200

223

1 653

Figures in Rand million

Loss from discontinued operations
Profit/(loss) for the year

whether the divisions of Scaw could be corporatised into
separate standalone companies to facilitate transactions withmultiple SEPs, the IDC commenced an extensive sale process.
The result anticipated is that IDC will not retain control in all three
Scaw businesses, namely Remainco (i.e. the remaining businesses
in Scaw which constitutes rolled, wire rod products and Scaw’s
main property assets), Grinding Media and Cast Products. On the
1 May 2018, the IDC successfully introduced a SEP in Remainco,
Barnes Southern Palace Consortium (BSP), led by a local steel
company, Barnes Group, and diluted our shareholding to 26%.
Remainco’s performance has shown significant improvement
under management of BSP.
The Grinding Media and Cast Products divisions were carvedout of Scaw and began operating independently from the 1stof March 2018. Magotteaux International S.A. (Magotteaux) and
Amsted Rail Company Inc. (Amsted) are the SEPs in Grinding
Media and Cast Products respectively. The IDC successfully
introduced Magotteaux as an SEP in Grinding Media on the 1st ofAugust 2018. Magotteaux took over management and an initialshareholding of 15% with an option to increase the shareholding
to 51% within four years from 1 August 2018. The IDC was diluted
to 59% with a BEE shareholding at 26%. Magotteaux have started
implementing initiatives to improve performance of Grinding
Media including assessment of regional expansion into West
Africa. Amsted was introduced as an SEP in Cast Products on
the 1 April 2019 and financial close is expected to be completeby the end of August 2019. Amsted will hold an initial 15%
shareholding in Cast Products with an option to increase its

shareholding to 49% within 7 years from 1 April 2019 and has
started implementing initiatives to turnaround the financial
performance of Cast Products.

Group Revenue
R’bn

20

19.6

19.4
17.9

16

14.2

12

10.3

8

4

0
Dividends received
Interest received
Fee income
Manufacuring, mining and other income

Revenue from Foskor dropped by 8% from the previous year
to R5 429 million. This was mainly driven by the reduction in
production volumes due to a strike and a fatality resulting in83

plant shutdowns during the year. The prices were however,slightly higher compared to the previous year. The IDC Board
is working with the Foskor Board and management to review
options to improve Foskor’s performance. Foskor remains a
strategic investment to the IDC.

Group operating profit/(loss)
The operating loss for the year was R498 million (2018:
R2 962 million profit; R579 million excluding capital profits) fromincreased expected credit losses as a result of the implementationof IFRS 9. In 2018, profit was boosted by a day-one-gain of R1 185
million that was realised on the unwinding of the Main Street 333(Exxaro) structure.

Group Operating profit/(loss)
R’bn

Income from equity accounted investments
The equity-accounted investments have shown an increase inperformance during the reporting period, with the Group’s shareof profits at R644 million compared to a profit of R419 million in
2018.

Loans, advances and investments
The IDC advanced R11.8 billion in new loans, advances andinvestments during the year, down from R15.2 billion in 2018.
The Corporation continued to seek development opportunities
despite the macro-economic challenges. This resulted in loans
and advances growing to R25.9 billion (net of repayments), from
R30.7 billion, and investments increasing from R81.0 billion to
R93.0 billion (net of disposals and preference share redemptions).

2.4

2.5

The IDC is committed to diversifying its portfolio over the
medium term in order to minimise the concentration risk towards
commodities and invest in a diverse portfolio, with more stable
growth prospects.

2.0
1.5
1.0

part of other comprehensive income. The main contributor tothe capital gain was the derecognition of the IDC’s investments
in BHP and Sappi.

1.0

Loans, advances and investments (mini-group)

0.6
0.5

R’bn

0.0
-0.5

140
-0.5

-0.5

-1.0

117.3

120

118.3

104.1
100

95.5

95.5

80

Impairments for the Group significantly increased by R916
million, from R2 732 million to R3 648 million, mainly driven by
the sluggish economic growth in South Africa. As a development
finance institution IDC usually takes more high-risk clients tostimulate the country’s economic growth. The Corporation is
confident that these interventions will be effective in curbing
the growth in impairments, whilst continuing to play its counter
cyclical role in the economy. The impairments in the current
financial year (R3 648 million) were attributed to the continuing
adverse macroeconomic environment and the change inimpairment methodology under IFRS 9. The impact of theweakening Rand and inflation also had a negative impact onsome exposures.
Financing costs for the Group have remained flat year-on-year.
The actual costs increased from the growth in borrowings of
R6 269 million, to meet the planned advances in the short-term.
This was mitigated by the foreign exchange gains realised fromcover taken to manage the exchange risks on foreign borrowings.
The Group realised capital profits of R2 289 million (2018:
R2 383 million) from the disposal of certain listed and unlisted
investments during the year. IFRS 9 does not allow these profits
to be recognised in the profit or loss anymore, but they become

84

60
40
20
0
Revaluation of investments to fair value
Investments at cost
Loans and advancesGroup borrowings
The growth in the borrowing portfolio was aligned with IDC’s
strategy to fund growth in the loans and advances book,predominantly from borrowings. Borrowings for the year grew to
R39 billion from R33 billion in 2019.
Borrowing activity during the year amounted to R12.3 billion,
with repayments of R7.1 billion. A large portion of the borrowing
was raised from local lenders through public bonds and bilateralfacilities with commercial banks. During the year under review thecommercial loans concluded had increased tenure to match theasset financed. The bonds issued were under the IDC Domestic
Medium-Term Note (DMTN) programme. Investor’s confidence
increased as was reflected by oversubscription at bond auctions
coupled with reverse enquiries from investors, indicating theirconfidence in the IDC’s creditworthiness and financial standing.
The IDC tapped the bond market 3 times during the year underreview.
The IDC’s future funding strategy seeks to diversify its funding
sources. This strategy will also be informed by local andinternational market conditions, pricing and available liquidity
in financial markets. The IDC will therefore continue to tap into
the traditional sources such as bond issuances, commercial
banks (both local and international) and development financial
institutions (DFIs), while searching for new funding sources.
DFIs and other foreign commercial banks continue to be agood source of funding, providing much-needed long tenureborrowings. These include the Kreditanstalt für Wiederaufbau(KfW), African Development Bank (AfDB), Agence Française deDéveloppement (AFD)/Proparco, European Investment Bank
(EIB), China Development Bank (CDB) and China Construction
Bank (CCB).
The Public Investment Corporation (PIC), acting on behalf of
the Government Employee Pension Fund, supported the green
efficiency strategy by providing a longer tenor private placementbond. The Unemployment Insurance Fund (UIF), in their quest
to reduce unemployment, partnered with the IDC to provide
funding to assist companies which would save and create newjobs. This was facilitated by the PIC. This diversified pool offunding provides the IDC flexibility to raise borrowings as andwhen required, depending on market volatility at the time. The
IDC continues to meet its financial obligations emanating fromthese funding sources, while maintaining excellent relationships
with our lenders and investors.

Group total assets, capital and reserves and thedebt/equity ratio

Total assets, capital and reserves and debt/equity
Total assets increased from R136.9 billion in 2018 to R144.6 billion
during the review period, mainly as a result of the increase in
the fair value of BHP and Kumba Iron Ore Limited (mainly due tohigher iron ore prices) as well as Sasol. Our borrowings increased
in line with the growth in loans and advances, resulting in thedebt/equity ratio increasing to 41.4% compared to 36.1% in theprior year.

Impairments (IDC Company)
In 2019, the IDC adopted IFRS 9 as an accounting standard,
replacing IAS 39. The adoption of IFRS 9 resulted in changes
in the classification and measurement of financial assets andimpairment provisioning methodologies. In terms of IFRS 9 total
impairments consist of two components:• 	Expected credit losses (ECLs) or loss allowances on financial
assets / debt instruments carried at amortised cost• 	Negative fair value adjustments on debt instruments carriedat fair value.
The introduction of ECLs on debt instruments carried atamortised cost resulted in a significant increase in loss allowancesfrom ca. R5.7 billion in 2018 to R15.0 billion in 2019 (R8.0
billion was an opening balance adjustment done via reserves).
Negative fair value adjustments on debt instruments carried atfair value increased from ca. R5.8 billion to R7.9 billion. The total
impairment provision for 2019 is thus R15.0 billion, with a ratio of
26.3% on the ECL component and 28.4% for total impairments.
The impairment charge to the income statement is R4.8 billion.
Our risk appetite thresholds for impairments are being reviewed
to accommodate the changes brought about by IFRS 9.
The IDC Executive Management and Board Risk and Sustainability
Committee receive quarterly reports on impairments and related
credit risk measures.

Impairments
R’bn

160

R’bn

160

50%

60%
55.9

140
140

50%
41.4%

120
33.0%

100
80

34.5%

36.1%

40%

26.8%

30%

60

20%

40

120

144.6
95.6

137.0
92.0

129.8
88.1

121.3
84.7

122.3
89.8

35%

47.2

28.4% 30%80

26.3% 25%

60

17.4%
16.7%

16.9%

16.7% 11.3%

10.1%

9.7%

10.4%

69.6

73.6

81.7

40
20

0

40%

53.3
55.6

8.8%
61.3

17.4%

20%
15%
10%
5%

89.3

0
0%

45%

100

10%
20

54.4

0%

Fair value adjustments
Cost of investments

Total assets

Impairments as a % of cost

Capital and reserves

Impairments as a % of cost - SPII

Debt/equity

Impairments as a % of market value

85

Write-offs (IDC Company)
The IDC writes off investments when all avenues of recovery havebeen exhausted.
During the year under review, R2.3 billion was written off versus
R3 billion in the previous year. The largest contributor to thewrite-offs in 2019 were Scaw (Pty) Ltd (R209 million), KC Energy(R191 million) and Matanuska Mozambique (R171 million).
Although the probability of recovery reduces post write-off,recovery efforts continue in the Legal Services environment.
Write-offs are reflected post recoveries.

Write-offs
R’bn

3.5
3.0

3.0
2.5

2.3
2.0

2.0
1.5

1.4

1.3

1.0
0.5
0.0

ASSET AND LIABILITY MANAGEMENT
Liquidity risk
Liquidity risk refers to an inability by the Group to meet its
obligations promptly for all maturing liabilities, increase infinancing assets, including commitments and any otherfinancial obligations (funding liquidity risk), or do so at materiallydisadvantageous terms (market liquidity risk).
Liquidity risk is governed by the Asset and Liability Management
Policy. The Asset and Liability Committee (ALCO) provides
objective oversight and makes delegated decisions related toliquidity risk exposures.
Sources of liquidity risk include:•	Unpredicted accelerated drawdowns on approved financing
or call-ups of guarantee obligations•	Inability to roll and/or access new funding•	Unforeseen inability to collect what is contractually due tothe Group•	Liquidity stress at subsidiaries and/or other SOEs
•	
A recall without due notice of on-balance sheet funds
managed by the Group on behalf of third-parties86•	A breach of covenant(s), resulting in the forced maturity ofborrowing(s)•	Inability to liquidate assets in a timely manner with minimalrisk of capital losses.
The IDC Corporate Treasury manages liquidity on a day-to-day
basis within Board-approved treasury limits to ensure that:•	
Sufficient, readily-available liquidity to meet probable
operational cash flow requirements for a rolling three-month
period is available at all times•	Excess liquidity is minimised to limit the consequential dragon profitability.
Liquidity coverage ratios aim to ensure that suitable levels of
unencumbered high-quality liquid assets are held to protect
against unexpected, yet plausible, liquidity stress events. Two
separate liquidity stresses are considered. Firstly, an acute threemonth liquidity stress that impacts strongly on both funding
and market liquidity and secondly, a protracted twelve-monthliquidity stress with a moderate effect on both funding andmarket liquidity. Approved high-quality liquid assets include cash,
near-cash, committed facilities, as well as a portion of the Group’s
listed equity investments after applying forced-sale discounts.
Structural liquidity mismatch ratios aim to ensure adequate
medium- to long-term liquidity mismatch capacity by maintaining
a stable funding profile. This is done by restricting, withinreasonable levels, potential future borrowing requirements as apercentage of total funding-related liabilities. A robust funding
structure reduces the likelihood of deterioration in the Group’s
liquidity position should sources of funding be disrupted. The
structural liquidity mismatch is based on conservative cash flow
profiling with the added assumption that liquidity, in the formof high-quality liquid assets, are treated as readily available (i.e.
recognised in the first-time bucket).

Market risk
Market risk is the risk that the value of a financial position or
portfolio will decline due to adverse movements in market rates.
In respect of market risk, the Group is exposed to interest rate risk,
exchange rate risk and equity price risk. Market risk is governedby the Asset and Liability Management Policy and ALCO provides
the objective oversight and makes delegated decisions related tomarket risk exposures.

Interest rate risk
Interest rate risk is the risk that adverse changes in market interest
rates may cause a reduction in the IDC’s future net interest
income and/or economic value of its shareholders’ equity. The
IDC’s interest rate risk is a function of its interest-bearing assets
and liabilities.
The primary sources of interest rate risk include:•	
Repricing risk: As a result of interest-bearing assets andliabilities that reprice within different periods. This includes
the endowment effect due to an overall quantum difference
between interest-bearing assets and liabilities

•	Basis risk: As a result of the imperfect correlation between
interest rate changes (spread volatility) on interest-bearing
assets and liabilities that reprice within the same period•	Yield curve risk: As a result of unanticipated yield curve shifts(i.e. twists and pivots)•	Optionality: As a result of embedded options in assets (i.e.
prepayment) and liabilities (i.e. early settlement), which may
be exercised based on interest rate considerations.
The sensitivity to interest rate shocks and/or changes in interestbearing balances is measured by means of earnings andeconomic value approaches. The former quantifies the impact
on net interest income over the next twelve months and latter
gauges the impact on the fair market value of assets, liabilities
and equity.

Exchange rate risk
Exchange rate risk is the risk that adverse changes in exchange
rates may cause a reduction in the IDC’s future earnings and/or
its shareholder equity.
In the normal course of business, the IDC is exposed to exchange
rate risk through its trade finance book and exposure toinvestments outside South Africa. The risk is divided into:•	Translation risk, which refers to the exchange rate risk
associated with the consolidation of offshore assets andliabilities or the financial statements of foreign subsidiaries
for financial reporting purposes•	Transaction risk, which arises where the IDC has cash flows/transactions (i.e. a monetary asset or liability, off-balance
sheet commitment or forecasted exposure) denominated inforeign currencies whose values are subject to unanticipatedchanges in exchange rates.
Any open (unhedged) position in a particular currency gives rise
to exchange rate risk. Open positions can be short (we need tobuy foreign currency to close the position) or long (we need to sellforeign currency to close the position) with the net open foreign
currency position referring to the sum of all open positions (spotand forward) in a particular currency. For purposes of hedging,net open foreign currency positions are segmented into thefollowing components:•	All exposures related to foreign currency denominatedlending and borrowing•	All foreign currency denominated payables in the form ofoperating and capital expenditure, as well as foreign currency
denominated receivables in the form of dividends and fees.

Equity price risk
Equity price risk is the risk that adverse movements in equity prices
may cause a reduction in the value of the Group’s investments inlisted and/or unlisted equity investments and therefore includes
future earnings and/or value of shareholders’ equity.
Sources of equity price risk include:•	Systematic risk or volatility in relation to the market as awhole•	Unsystematic risk or company-specific risk factors.

The investment portfolio’s beta is used as an indication ofsystematic, non-diversifiable risk. Due to the long-term nature of
the Group’s investments, unsystematic risk is managed throughdiversification.
Sensitivity analyses were performed on the Group’s equity
portfolio to determine the possible effect on the fair value shoulda range of variables change, such as cash flow, earnings and net
asset values. These assumptions were built into the applicablevaluation models.
Our Asset and Liability Management and Risk Management
practices, together with regular scenario planning, assist
Management to ensure that this objective is achieved.

FUTURE PERFORMANCEWe expect the 2019 calendar year to be another challenging
year as a result of a difficult set of conditions in the South African
economy and modest growth globally.
Profitability could be impacted significantly in the year aheadmainly due to lower dividend income forecasts. Our balance
sheet remains strong and we intend growing it further during thenext five years, with advances of ca R100 billion in total over that
period. This will be funded from borrowings, with the balance
funded through internally generated funds. Gearing levels are
expected to increase over the next few years, in line with thestrategy to utilise more debt funding.
Value added statement (IDC Company)mpany)
2019

2018

1 913

953

(1 313)(4 930)

415
3 299

1 784
5 215

(3 930)

(334)

384

2 688

1 022
62

1 032
121

(304)

(529)

Taxation (including deferred tax)
Dividends to shareholders

(354)
50

(579)
50

Value reinvested in operations

(396)

2 064

Transfer to/(from) reserves (retained
earnings)
Depreciation and amortisation

(420)
24

2 043
21

384

2 688

Figures in rand million
Value created
Net interest income
Impairment losses on loans,advances and investments
Other income from lending
activities
Other investment income
Operating expenditure and project
feasibility expenses

Value allocatedBenefits to employees
Social spending in communities
To government as taxation anddividends

87

ASSURANCE REPORT
Independent Assurance Provider’s Limited Assurance Report on Selected
Key Performance Indicators to the Directors of Industrial Development
Corporation of South Africa Limited
REPORT ON SELECTED KEY PERFORMANCE
INDICATORS
We have undertaken a limited assurance engagement on
selected sustainability key performance indicators (KPIs), as
described below, and that are presented in the 2019 Integrated
Report of the Industrial Development Corporation of South Africa
Limited (IDC) for the year ended 31 March 2019 (the Report).
This engagement was conducted by a multidisciplinary teamincluding specialists with relevant experience in sustainability
reporting.

SUBJECT MATTER
We are required to provide limited assurance on the following
selected KPIs. The selected KPIs described below have been
prepared in accordance with IDC’s reporting criteria that
accompanies the performance information on the relevant
pages of the Report (the accompanying IDC reporting criteria)
and the reporting boundary is IDC’s operations.

Material Issue

Key Performance Indicators

Unit ofMeasurement

Guideline/Criteria

Boundary

Reference
page number

Industrial development•

Value of funding approved

Rand Value (ZAR)

IDC Internal Criteria

IDC only1

Socio-economic
development•E xpected direct jobs created/saved(approved)Value of funding to Black Industrialists(approved)

Number (#)

IDC Internal Criteria

IDC only1

Rand Value (ZAR)

IDC Internal Criteria

IDC only1

 etention - % turnover of employeesRoccupying critical rolesSuccession - % critical roles that haveidentified potential successors for
immediate and/or 1-3 years
Average number of hours training

Percentage (%)

IDC Internal Criteria

IDC only

62

Percentage (%)

IDC Internal Criteria

IDC only

63

Number (#)

IDC Internal Criteria

IDC only64

Number (#) andPercentage (%)

IDC Internal Criteria

IDC only73

Text claim

IDC Internal Criteria

IDC only73•

T otal number and percentage of
operations assessed for risks related
to corruption and the significant risks
identified
Communication and training on anticorruption policies and procedures
Monitoring high risk portfolio

Text claim

IDC Internal Criteria

IDC only

66•

Stakeholder engagement

Text claim

IDC Internal Criteria

IDC only

12

Human Capital

•
•
•
•

Governance,
Regulation and Risk
Management••

Partners

INHERENT LIMITATIONS
Non-Financial performance information is subject to more
inherent limitations than financial information, given thecharacteristics of the subject matters and the methods used
for determining, calculating, sampling and estimating suchinformation. The absence of a significant body of establishedpractice on which to draw allows for the selection of certain
different but acceptable measurement techniques which
can result in materiality and the accuracy of data are subject
individual assumptions and judgements. The precision thereof
may change over time. It is important to read the report in thecontext of the reporting criteria.

88

Further, because of the test nature and other inherent limitationsof an audit, together with the inherent limitations of internal
control, there is an unavoidable risk that some, even material,
misstatements may not be detected, even though the audit
is properly planned and performed in accordance with theInternational Standard on Assurance Engagements, ISAE 3000
- Assurance Engagements other than Audits or Reviews ofHistorical Financial Information.
Where the information relies on the factors derived by the
independent third parties, our assurance work would not include
an examination of the derivation of those factors and other third
party information.

OUR INDEPENDENCE AND QUALITY CONTROL
We are independent of the entity in accordance with the sections
290 and 291 of the Independent Regulatory Board for Auditors’
Code of Professional Conduct for Registered Auditors (Revised
January 2018), parts 1 and 3 of the Independent Regulatory
Board for Auditors’ Code of Professional Conduct for Registered
Auditors (Revised November 2018) (together the IRBA Codes)
and other independence requirements applicable.
We have complied with other ethical requirements of the IRBA
Code, which is founded on fundamental principles of integrity,
objectivity, professional competence and due care, confidentiality
and professional behaviour. The IRBA Code is consistent with theInternational Ethics Standards Board for Accountants Code of
Ethics for Professional Accountants.
The Firms applies International Standard on Quality Control
1 (ISQC 1), Quality Control for Firms that Perform Audits andReviews of Financial Statements, and Other Assurance andRelated Services Engagements, and accordingly maintains acomprehensive system of quality control, including documented
policies and procedures regarding compliance with ethicalrequirements, professional standards and applicable legal andregulatory requirements.

OUR RESPONSIBILITY
Our responsibility is to express a limited assurance conclusion on
the selected KPIs based on the procedures we have performed
and the evidence we have obtained. We conducted our limited
assurance engagement in accordance with the International
Standard on Assurance Engagements (ISAE) 3000 (Revised),
Assurance Engagements other than Audits or Reviews ofHistorical Financial Information, issued by the International
Auditing and Assurance Standards Board. That Standard requiresthat we plan and perform our engagement to obtain limited
assurance about whether the selected KPIs are free from material
misstatement.
A limited assurance engagement undertaken in accordancewith ISAE 3000 (Revised) involves assessing the suitability inthe circumstances of IDC’s use of its reporting criteria as thebasis of preparation for the selected KPIs, assessing the risks ofmaterial misstatement of the selected KPIs whether due to fraud
or error, responding to the assessed risks as necessary in thecircumstances, and evaluating the overall presentation of theselected KPIs. A limited assurance engagement is substantiallyless in scope than a reasonable assurance engagement in relation
to both risk assessment procedures, including an understandingof internal control, and the procedures performed in response to
the assessed risks. The procedures we performed were based on
our professional judgement and included inquiries, observationof processes followed, inspection of documents, analyticalprocedures, evaluating the appropriateness of quantification
methods and reporting policies, and agreeing or reconciling with
underlying records.
Given the circumstances of the engagement, in performing theprocedures listed above we:•	Interviewed management and senior executives to obtain
an understanding of the internal control environment, risk
assessment process and information systems relevant to thesustainability reporting process;•	Inspected documentation to corroborate the statements ofmanagement and senior executives in our interviews;•	
Tested the processes and systems to generate, collate,aggregate, monitor and report the selected KPIs;•	Performed a controls walkthrough of identified key controls;•	
Inspected supporting documentation on a sample basis
and performed analytical procedures to evaluate the data
generation and reporting processes against the reporting
criteria;•	
Evaluated the reasonableness and appropriateness ofsignificant estimates and judgments made by the directors
in the preparation of the selected KPIs; and•	Evaluated whether the selected KPIs presented in the Report
is consistent with our overall knowledge and experience ofsustainability management and performance at IDC.
The procedures performed in a limited assurance engagement
vary in nature and form, and are less in extent than for a reasonableassurance engagement. As a result the level of assurance
obtained in a limited assurance engagement is substantiallylower than the assurance that would have been obtained had we
performed a reasonable assurance engagement. Accordingly, we
do not express a reasonable assurance opinion about whether
IDC’s selected KPIs have been prepared, in all material respects, inaccordance with the accompanying IDC reporting criteria.

LIMITED ASSURANCE CONCLUSION
Based on the procedures we have performed and the evidence
we have obtained and subject to the inherent limitations
outlined elsewhere in this report, nothing has come to ourattention that causes us to believe that the selected KPIs as set
out in the subject matter paragraph for the year ended 31 March
2019 are not prepared, in all material respects, in accordance withthe accompanying IDC reporting criteria.

89

OTHER MATTERS

RESTRICTION OF LIABILITY

The maintenance and integrity of the IDC’s Website (www.idc.
co.za) is the responsibility of IDC management. Our procedures
did not involve consideration of these matters and, accordingly
we accept no responsibility for any changes to either the
information in the Report or our independent limited assurance
report that may have occurred since the initial date of its
presentation on IDC website.

Our work has been undertaken to enable us to express a limited
assurance conclusion on the selected KPIs to the Directors of IDC
in accordance with the terms of our engagement, and for noother purpose. We do not accept or assume liability to any party
other than IDC, for our work, for this report, or for the conclusion
we have reached.

SizweNtsalubaGobodo Grant Thornton Inc.
Registered Auditor
Per Fikile Zwane
Director
Chartered Accountant (SA)Registered Auditor
31 July 2019

Ngubane and Company (JHB) Inc.
Registered Auditor
Per Nqabisa Ravele
Director
Chartered Accountant (SA)Registered Auditor
31 July 2019

SizweNtsalubaGobodo Grant Thornton Inc.
20 Morris Street East
Woodmead2191

Ngubane and Company (JHB) Inc.
1 Superior Close Off 16th Road
Midrand1685

90

GLOSSARY

AGM
ALCO
AMD
AML
APAP
APDP
BAC
BAIC
B-BBEE
BCM
BEE
BER
BIC
BR&SC
BSEC
CAMASA
CEO
CFP
CRO
CSI
CSIR
DFI
DIS
DMR
the dti
EAP
EDD
EE
EHS
ERMF
ERT
ESG
EXCO
FIC
FICA
FMCG
FSC
FSTC
GDP
GHG
GRI
HC
HCNC
ICT
IDC
IFRS
IIRC
IMC
IPAP

Annual General Meeting
The Asset and Liability Committee
South African Aerospace Maritime & Defence
Industries Association
Anti-Money Laundering
Agricultural Policy Action Plan
Automotive Production and Development
Programme
Board Audit Committee
Beijing Automobile International Corporation
Broad-Based Black Economic Empowerment
Business Continuity Management
Black Economic Empowerment
Bureau for Economic Research
Board Investment Committee
Board Risk and Sustainability Committee
Board Social and Ethics Committee
Commercial Aviation Manufacturers Association ofSouth Africa
Chief Executive Officer
Contingency Funding Plan
Chief Risk Officer
Corporate Social Investment
Council for Scientific and Industrial Research
Development Finance Institution
Development Impact Support
Department of Mineral Resources
Department of Trade and Industry
Economically Active Population
Economic Development Department
Employment Equity
Environmental Health and Safety
Enterprise-wide Risk Management Framework
Emergency Response Team
Environmental, Social and Governance
Executive Committee
Financial Intelligence Centre
Financial Intelligence Centre Act
Fast-Moving Consumer Goods
Financial Sector Codes
Financial Sector Transformation Council
Gross Domestic ProductGreenhouse Gas
Global Reporting Initiative
Human Capital
Human Capital and Nominations Committee
Information and Communication Technology
Industrial Development Corporation
International Finance Reporting Standards
International Integrated Reporting Council
Investment Monitoring Committee
Industrial Policy Action Plan

ISAE
IT
JV
MHCV
NAACAMNAAMSA
NDP
NGP
NIP
NPC
NPL
NUM
NUMSA
NYDA
OHS
ORM
ORM
PAIA
PEP
PET
PFMA
PIC
PICC
PIP
POPI
PRASA
RAG
RAS
RCSA
REIPPPP
RMD
SA
SAISI
SBU
SDG
sefa
SEIFSA
SENS
SEZ
SME
SOE
SPPI
SPV
UIF
US
VAMCOSAWWFInternational Standards for Assurance
Engagements
Information Technology
Joint Venture
Medium and heavy commercial vehicles
National Association of Automotive Component
and Allied Manufacturers
National Association of Automobile Manufacturersof South Africa
National Development Plan
New Growth Path
National Infrastructure Plan
Non Profit Company
Non-performing Loan
National Union of Mineworkers
National Union of Metalworkers of South Africa
National Youth Development Agency
Occupational Health and Safety
Operational Risk Management
Operational Risk Management
Promotion of Access to Information Act
Politically Exposed Persons
Polyethylene Terephthalate
Public Finance Management Act
Public Investment Corporation
Presidential Infrastructure Coordinating
Commission
Prominent Influential Persons
Protection of Personal Information Act
Passenger Rail Agency of South Africa
Red, Amber, Green
Risk Appetite Statement
Risk Control Self-Assessment
Renewable Energy Independent Power Producer
Procurement Programme
Risk Management Department
South Africa
South African Iron and Steel InstituteStrategic Business Unit
Sustainable Development Goal
Small Enterprise Finance Agency
Steel and Engineering Industries Federation ofSouth Africa
Stock Exchange News Service
Special Economic Zone
Small and Medium EnterpriseState-owned Enterprise
Solely payments of principal and interest
Special Purpose Vehicle
Unemployment Insurance Fund
United States
Valve and Actuators Manufacturers Cluster ofSouth Africa
World Wildlife Fund

91

CONTACT INFORMATIONHEAD OFFICE
Gauteng

19 Fredman Drive, Sandown 2196
PO Box 784055, Sandton 2146
Tel: 011 269 3000 | Fax: 011 269 3116 | Email: callcentre@idc.co.za

REGIONAL OFFICES
Eastern Cape
East London:

Port Elizabeth:

Mthatha:2nd Floor Block B, Chesswood Office Park, Winkley Street, Berea, East London
PO Box 19048, Tecoma 5214
Tel: 043 721 0733/4 | Fax: 043 721 0735 | Email: eastlondon@idc.co.za
Southern Life Gardens, Block A (Ground) 70 2nd Avenue, Newton Park, PE
PO Box 27848, Greenacres, Port Elizabeth 6057
Tel 041 363 1640 | Fax: 041 363 2349 | Email: kingsleyr@idc.co.za/monican@idc.co.za
Ground Floor, ECDC House, 7 Sisson Street, Fort Gale, Mthatha 5201
Tel: 047 504 2200 | Fax: 047 531 1587 | Email: kingsleyr@idc.co.za

Free State
Bloemfontein:

Mazars Building, 46 1st Avenue, Westdene, Bloemfontein
Private Bag X 11, Suite 25, B hof 9324
Tel: 051 411 1450 | Fax: 051 447 4895

Kwazulu-Natal
Durban:Pietermaritzburg:

Suite 2101, 21st Floor, The Embassy Building, 199 Anton Lembede Street, Durban
PO Box 2411, Durban 4000
Tel: 031 337 4455 | Fax: 031 337 4790 | Email: patm@idc.co.za
1st Floor, ABSA Building 15 Chatterton Road, Pietermaritzburg
PO Box 2411, Durban 4000
Tel: 033 328 2560 | Fax: 033 342 5341 | Email: patm@idc.co.za

LimpopoPolokwane:

73 Biccard Street, Maneo Building, Suite 1
Postnet Suite 422, Private Bag X9307, Polokwane 0699
Tel: 015 299 4080 4099 | Fax: 015 295 4521 | Email: kgampib@idc.co.za

Mpumalanga
Nelspruit:

Maxsa Building, 15 Ferreira Street, Suite 702, 7th Floor, Mbombela
PO Box 3724, Mbombela 1200
Tel: 013 752 7724 | Fax: 013 752 8139 | Email: nelspruit@idc.co.za

Northern Cape
Kimberley:

Upington:

92

Sanlam Business Complex, 13 Bishops Avenue, Kimberley 8301
PO Box 808, Kimberley 8300
Tel: 053 807 1050 | Fax: 053 832 7395 | Email: mehmooda@idc.co.za
De Drift Plaza, Block 6, Olyvenhoutsdrift Settlement, Louisvale Avenue, Upington 8800
Tel: 054 337 8600 | Fax: 054 334 0835

North West
Rustenburg:

Brits:
Mahikeng:

1st Floor, Sunetco Building, 32B Heystek Street, Rustenburg
Postnet Suite 290, Private Bag X 82245, Rustenburg 0030
Tel: 014 591 9660 /1 | Fax: 014 592 4485
Suite 108, Safari Centre, 28 Van Velden Street, Brits 0250
Tel: 012 252 0008 | Fax: 012 252 4657
Postnet Suite 89, Private Bag X2230, Mahikeng 2791
Tel: 018 397 9942

Western Cape
Cape Town:

28th Floor ABSA Centre, 2 Riebeeck Street Cape Town
PO Box 6905, Roggebaai 8012
Tel: 021 421 4794 | Fax: 021 419 3570 | Email: lizon@idc.co.za

SATELLITE OFFICES
Satellite offices are not permanently staffed and appointments must be arranged in advance.

Free State
Phuthaditjhaba:

Mapoi Road, Phuthaditjaba 9869
Tel: 051 411 1450

Welkom:1 Reinet Street, Welkom 9460
Tel: 051 411 1450

Kwazulu-NatalRichards Bay:

Suite 17, Partidge Place, cnr Lira and Tasselberry Road, Richards Bay 3900
Tel: 031 337 4455

LimpopoThohoyandou:

Seda office: Old Mutual Building, Old Group Scheme Offices, Mphephu Road, Thohoyandou
7950
Tel: 015 299 4080

Tzaneen:

1st Floor Prosperitas Building, 27 Peace Street, Tzaneen (Seda) 0850
Tel: 015 299 4080

Mpumalanga
eMalahleni:

23 Botha Avenue cnr Rhodes Street, Hi-Tech House, eMalahleni 1035
Tel: 013 752 7724

Secunda:South Wing, Municipal Building Lurgi Square, Secunda 2302
Tel: 013 752 7724

North West
Klerksdorp:

Office 35, West End Building, 51 Leask Street, Klerksdorp 2571
Tel: 018 462 6586 | Fax: 018 462 5061

Vryburg:

Dr KK District Municipality Economic Agency
83 Vry Street, Vryburg 8601
Tel: 053 927 0590 | Fax: 053 927 0590

Western Cape
George:Beacon Place, 125 Meade Street, George 6529
Tel: 021 421 4794

93

ADMINISTRATIONDIRECTORSREGISTERED OFFICE

Executive

IDC
19 Fredman Drive
Sandown 2196
PO Box 784055
Sandton 2146
Telephone +27 (11) 269 3000
Fax: +27 (11) 269 3116
Email: callcentre@idc.co.za
Email: service@idc.co.za
Call centre contact number: 0860 693 888
Website: www.idc.co.za

TP Nchocho (CEO)Non-Executive
BA Mabuza (Chairperson)
LI Bethlehem
BA Dames
RM Godsell
A KrielSM Magwentshu-Rensburg
NP Mnxasana
M MorePM Mthethwa
ND Orleyn
NE Zalk

AUDITORSSNG Grant Thornton (Johannesburg)
Ngubane & Company (Johannesburg)

94

COMPANY SECRETARYP Makwane
Registration number:
1940/014201/06

NOTES95

NOTES96

www.idc.co.za

RP243/2019
ISBN: 978-0-621-47570-8