Introducing the Industrial Development Corporation (IDC) Presentation by: Raisibe Morathi Chief Investment Officer Industrial Development Corporation of South Africa Introducing the IDC Johannesburg May 2004

Corporate profile… Established in 1940, the IDC is a self-financing, state-owned development finance institution Provides financing to entrepreneurs engaged in competitive industries Follows normal company policy and procedures in its operations Pays income tax at corporate rates and dividends to the shareholder Independent Board of Directors Reports on a fully consolidated basis, with its Annual Report freely available to the public IDC Head Office in Sandton, South Africa

IDC’s Operational Structure… CEO / President Khaya Ngqula 23 Supporting departments Professional Services Trevor Mashabane HR Division Lesé Matlhape Marketing & Corporate Affairs Division Neo Sowazi Legal Services & General Counsel Division Tony Tshivhase CIO Raisibe Morathi CFO Geoffrey Qhena COO Gert Gouws Projects Division Jaco Kriek Industrial Sectors Division Ufikile Khumalo Services Sectors Division Gerrit van Wyk 14 Strategic Business Units (SBUs), each focussed on specific economic sectors

IDC Objectives Create employment opportunities Improve the real standards of living of all South Africans: Poor provinces Rural areas Foster entrepreneurship Small and medium enterprises Economic empowerment of the historically disadvantaged, including broad based Development of industrial capacity in Africa

IDC financing trend (1940s - 2000s)… Total Value of financing approvals 15 30 45 60 75 90 1940s 1950s 1960s 1970s 1980s 1990s *2000s 1 2 3 4 5 6 7 Rand billion at 2002 prices As a % of Gross Fixed Capital Formation (GFCF) in SA 83.5 16.7 % of GFCF Rand billion IDC financing to reach over R80 billion in 2000-2010 Projected IDC Financing low economic activity

Investing in the Economy… Financial year 2002/2003… IDC’s investment approvals amounted to R 6.2 billion involving 345 deals IDC’s investments as percentage of private sector investment activity amounted to 4.7% of GFCF IDC awarded an investment grade rating of Baa2 from Moody’s Investor’s Service

Financial track record to June 2003… Income -500 500 1 000 1 500 2 000 98 99 00 01 02 R million Net attributable income Operating income 03 2002/2003 produced a net attributable income of R 787 million; Balance sheet remains strong. Capital and reserves grew at an average rate of 11.6% per annum over the past five years to reach R 22.1 billion at the end of the 2002/2003 financial year. Loan book value stood at R 6.5 billion Investments stood at R 16.6 billion The Debt:Equity ratio was 28% Total assets value was R 29.8 billion Capital and Reserves 5 10 15 20 25 30 98 99 00 01 02 R billion 03

Development Impact… Financial year 2002/2003… Assisted in the creation of over 17 500 new job opportunities Additional export earnings worth R 3 837 million facilitated Finance to empowerment companies represented 46% of the total number of approvals and 33% of total value

Development Impact… Financial year 2002/2003… Assisted in the creation of over 17 500 new job opportunities Additional export earnings worth R 3 837 million facilitated Finance to empowerment companies represented 46% of the total number of approvals and 33% of total value A significant portion of number of approvals (74%) went towards medium-sized enterprises (R1 010 million)

Challenges Creating sustainable jobs Economic environment particularly in manufacturing sectors Inflexible labour market Capital bias in manufacturing Addressing the challenge through labour intensive sectors Tourism Franchising

Challenges cont…. Rural development and penetration of poor provinces Structure of the SA economy (bias towards big cities) Industrial infrastructure (transport, telecommunication ) Labour migration Formation of a development agencies unit (R30m) Development Funding of R50m as a subsidy Need for grant funding Linkages with established businesses

Challenges cont…. Black Economic Empowerment Concentration Demographics Skills Market gap (capital) Acquisitions of existing businesses Desire to take risk on the economy Broad based participation and ownership Need for more entrepreneurial support Transformation charters Funds (Mining, Women, NEF) 2,5% contribution by BEE

Challenges cont…. Small and Medium Enterprise Legislation Cost of doing business Market access Skills Rigidity of financiers Portfolio approach to risk management Hand-holding and mentorship required Concessional funding required

Prospects… Play a leading role in facilitating empowerment deals. Continue to seek local and international co-financing opportunities. Increased human resource development within the IDC. Entrench IDC’s financial sustainability through improved internal systems.

In conclusion… IDC will continue to …. Invest on economic merit based on sound business principles Utilise resources to achieve development by addressing market failures Focus on Government’s policy objectives Align with the dti strategy Be flexible to quickly respond to change Be a leading DFI’s Achieve our goal of prosperity for all

Thank You