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Stimulating Industry in KwaZulu-Natal
“This year the Industrial Development Corporation (IDC) celebrates 80 years of existence in its role as a Development Funding Institution (DFI), providing funding for manufacturing. We have come a long way in aiding the development of the South African economy during this time and have also assisted many companies in expanding and trading into the African continent,” says IDC’s KwaZulu-Natal (KZN) Regional Manager, Pat Moodley.
The IDC’s key sectors in the province include the textiles, clothing, and footwear industry, which Moodley says is a key driver in the KZN economy, especially because of easy access to the Durban port for exports. Other economic sectors supported in this region include agro-processing, chemicals, plastics and medical products; wood and furniture products; automotive and transportation; machinery and equipment; electronics, basic metals, tourism, infrastructure, as well as energy. “With industrialisation comes development, which includes job creation and localisation. An additional element which we actively focus on is the growth and empowerment of black industrialists, and youth and women owned businesses,” explained Moodley.
Much of the investment in the province is focused on stimulating localisation, with a view to replace imports. As an example, in terms of government policy, a certain percentage of vehicle manufacturing must include using locally produced components. The IDC has assisted a numberof first and second tier vehicle component manufacturers in this regard so that they can become globally competitive.
“The onset of Covid-19 negatively impacted businesses, not just locally, but on a global scale. As the IDC, we have worked with government and other DFIs in assisting businesses to recover and provide funding packages that will stimulate the economy,” says Moodley. “We have a range of funds and interventions in place to address Covid-19 related funding requirements, including assisting companies that have capacity to acquire and/or manufacture products needed to treat, curtail and combat the spread of the pandemic,” says Moodley. A comprehensive list of essential supplies that are eligible for funding is available from the Treasury Department.
Other interventions offered by the corporation include general distress funding, which is available to businesses, provided they have a clear turnaround strategy. In addition to this, there is the Small Business Distressed Fund for SMEs with a trading history of more than 12 months and this fund is also available for emerging enterprises with a turnover of less than R50 million per annum (minimum loan amount of R1 million to a maximum R15 million).
“At prime less 3% this is an attractive interest rate. The important thing is that businesses need to have a very clear turnaround plan over the next 12 to 24 months and must have been in a healthy financial position before Covid-19 started . The repayment term for this loan is 60 months,” explained Moodley. “There are a sizeable number of small businesses in KwaZulu-Natal that have the opportunity to access funding at competitive rates, however, sustainability is key,” he adds.
The main difference between the IDC’s and other financial institution’s approaches to funding is that the corporation does not practice security-based lending, but rather considers the viability of the business and cash flows to service their loan repayments. The corporation however takes security for loans disbursed and is open to crowd funding with other financial institutions as a way to share the risk on transactions.
“Our first consideration is the economic merit of each business; meaning it has to be sustainable, viable and profitable. In our application process, we go through what we call an initial assessment to see that the application meets all the basic criteria and mandate of the IDC. Once that stage is passed, we go into what we call a due diligence process which is a comprehensive assessment of the business including management, technical, financial, and marketing capacity,” explains Moodley.
The IDC is a responsible lender and looks at compliance in all areas such as taxation, labour, health and safety, as well as environment. Of importance is ensuring that all necessary documentation and returns – including financial statements, tax certificates, labour returns, etc. are up to date.
“We always advise clients or entrepreneurs to be transparent with us as our due diligence process will unpack any non-compliance,” advised Moodley. “Be realistic, remember you are projecting turnover, so you have to be able to quantify revenue streams and ensure that these are achievable,” he adds.
The IDC has an online portal for applications. The KZN regional office is open Monday to Friday and staff are available to attend to enquiries or applications. “I suggest clients make an appointment, come sit with us and pitch their business proposals,” said Moodley. During the Covid-19 lockdown, the IDC went through a realignment process to streamline its service to clients. To reduce the number of touch points, the regional offices now handle funding proposals up to R15 million, proposals over these amounts are immediately referred to the relevant business unit at head office for further processing. This process means that the client deals with the relevant person from day one, significantly reducing the turnaround time for applications.
If a project does not meet the IDC mandate it can be referred to a different funding institute. “Our responsibility as a development finance institution is to assist clients. If we can’t assist in line with our mandate, we will pass clients on to other relevant DFIs. We are always there to ensure that the client gets the right information,” adds Moodley.
“We have some sizeable applications currently in our pipeline in KwaZulu-Natal. I think that there is a positive outlook for the province. I remain positive that as lockdown restrictions are eased, there will be a greater number of requests for more funding and we can get the economy going again,” concluded Moodley.
Full Name of Company: The Industrial Development Corporation of South Africa Ltd (IDC)
Nature of Business: Development Finance Institution.
Holding Company: Self-financing corporation owned by the South African Government
Date Established: 1940
To be the primary driving force of commercially sustainable industrial development and innovation for the benefit of South Africa and the rest of Africa.
Regional Manager KZN: Pat Moodley
KwaZulu-Natal Durban Office:
Physical Address: Office 2101, 21st Floor,
The Embassy Building, 199 Anton Lembede Street, Durban, 4001
Postal Address: P.O. Box 2411, Durban, 4000
Tel: +27 (0)31 337 4455
KwaZulu-Natal Pietermaritzburg Office:
Physical Address: 1st Floor, ABSA House, 15 Chatterton
Tel: +27 (0)33 328 2560
Industrial Development Corporation of South Africa Ltd (IDC)
This year the Industrial Development Corporation (IDC) celebrates 80 years of existence in its role as a Development Funding Institution (DFI)
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