MEASURING THE IDC’S SUCCESS
South Africa has experienced low economic growth rates in the past five years as a result of numerous factors: from supply-side constraints such as rising costs, through to demand-side challenges such as high household indebtedness. In these uncertain times, how then should we be measuring the success of the Industrial Development Corporation (IDC)? Reporting our results for the 2015 financial year, our 75th year in existence, you could look at the IDC’s bottom line and say, yes, we have been successful, having reported R11.5 billion in approvals.
But is this the most important measure of success for us at the IDC?
Not really. I’m not saying profitability isn’t an important metric for the IDC. It is critical that we make a return on our investments to ensure our long-term selfsustainability.
As a development finance institution, our mandate is broader than just ensuring the profitability of the business.
It is about making sure we contribute to the long-term success of the South African economy by providing finance to those businesses that are unable to secure capital from commercial entities such as banks.
In so doing, the IDC contributes to the creation of balanced, sustainable economic growth in South Africa and on the rest of the continent. We want to promote entrepreneurship through the building of competitive industries and enterprises based on sound business principles. By developing industrial capacity, the IDC achieves specific outcomes. The most important of these is to enable job creation through the companies we fund.
Focusing though on trying to find short-term measurement metrics to measure whether we have been successful in any given year misses the point of what the IDC aims to achieve. We look to make long-term investments in businesses that the private sector finds too risky.
We are also very mindful that we don’t, as an institution, crowd out private sector investors. Rather, we want to create a market in which the private sector can play a role at a later stage.
I am confident that within our portfolio there is at least one business that is the next South African industrial champion that has its roots with the IDC. And that will be the measure of our success.
Qhena is the CEO of the IDC