IDC assets not available for SOEs
• Gordhan raised possibility of liquidating some assets
Industrial Development Corporation assets were not available to fund struggling state-owned enterprises, although the possibility had been discussed, CEO Geoffrey Qhena said on Monday.
Industrial Development Corporation (IDC) assets were not available to fund struggling state-owned enterprises (SOEs), although the possibility had been discussed, CEO Geoffrey Qhena said on Monday.
The Treasury, under former finance minister Pravin Gordhan, had engaged the development finance institution over the possibility of liquidating some of its assets to fund SOEs, Qhena said following the release of the IDC’s financial results for the year to March.
“We demonstrated that the assets we have would be used to support new and existing businesses. There is no expectation that IDC assets are available [to fund SOEs].”
At the end of March, the IDC had listed investments worth R44.8bn — including in Sasol, Kumba Iron Ore, BHP and Life Healthcare. Total assets increased from R121bn in 2016 to R129.8bn, driven by fair value gains in BHP and Kumba.
Loans and advances grew 8% to R25.8bn.
The IDC, which falls under the Economic Development Department but is funded off its own balance sheet, is tasked with stimulating economic growth and industrial development in SA.
To counter the perception the IDC had funded politically connected individuals, it was now disclosing details of its clients, including the shareholders and any “politically exposed persons” connected to the deals it funded. “I’ve not had any pressure; there has been no political interference at all,” Qhena said.
The government wanted the IDC to “take risks, create jobs and disburse affordable funds”, but it had always maintained this should be done sustainably.
After-tax profit jumped from R223m to R2.2bn in the period, due to the unwinding of a black economic empowerment transaction relating to Exxaro that delivered a R1.7bn profit. Interest income on loans to clients also increased, while impairments and write-offs reduced.
The sluggish economy led to a 3% decline in disbursements to R11bn. This could slow further if the economy did not recover, Qhena said.
Undrawn commitments — predominantly in the mining and metals, industrial infrastructure, and chemicals and textiles industries — totalled R31bn.
The Gupta-owned Oakbay Resources and Energy still owed the IDC R37.5m on an initial R250m loan. This loan was made in 2010 to fund the purchase of Shiva Uranium, in line with the IDC’s investment mandate, Qhena said. The security on the loan was still intact.
The IDC had also converted R256m into equity when Oakbay listed in 2014 at R9 a share.
Its listing was voluntarily suspended in June at R5.80 a share, suggesting the IDC could suffer a R90m loss. It was doing a discounted cashflow valuation to determine its exposure, Qhena said. The IDC was also engaging with Oakbay to ensure it would not lose value on its investment and the loan would be repaid timeously, he said.
IT IS DISCLOSING DETAILS OF ITS CLIENTS, INCLUDING … ‘POLITICALLY EXPOSED PERSONS’