International Finance Corporation to extend lending in SA
Moneyweb
As economic growth slows and business confidence fades, so banks and other credit providers have become more cautious in their lending practices.
This has opened up a gap for development finance institution, the International Finance Corporation (IFC), to extend its lending in the country. According to the latest annual report, new investment volume in SA more than doubled between 2016 and 2017.
In the year to end June, 2017, new investments reached $428 million (2016: $179 million). This is the IFC’s strongest year for new business in SA since 2013 and saw the investment portfolio in SA reach $1.2 billion.
“It is not our job to displace private sector funding and until recently the SA banking sector and capital markets have provided much of the capital that the private sector needed,” says the IFC’s Saleem Karimjee.
However, as the economy tightens, the financial sector tends to manage its loan book more conservatively and typically lending cycles become shorter, thus opening opportunities for long-term financiers.
Its most recent SA investments include FirstRand, BMW, Bounty Brands and ADvTech.
Perhaps the biggest opportunities lies with SMEs. In June, the IFC announced it was investing R2.6 billion in FirstRand in a transaction that launched a broader programme aimed at expanding SME lending and strengthening support for SMEs by the formal banking sector.
There is massive unmet demand by SMEs for funding and support in South Africa. As such, the IFC has designed the SME Push Programme to channel anything between R26 billion and R39 billion-worth of investment into SA SMEs over the next five to seven years. The package will include investments, risk sharing facilities, and advisory services.
Manufacturing – for its job creation possibilities – is another area of interest. This year saw it commit $150 million to BMW South Africa, which is investing R6 billion into retooling its Rosslyn plant, which will produce the new BMW X3.
With a presence in 16 other African countries, the IFC is also in a position to help companies grow their business outside of SA.