Industrial Development Corporation

1. Industrial Development Corporation Corporate Plan 2013/14 to 2017/18 13 August 2013

2. Structure of Presentation • Background • Revisions to IDC’s Strategy • Leading Industrial Development by Driving Implementing the NGP and IPAP • Balancing increased impact with sustainability of investments • Targets • IDC portfolio

3. Overview

4. Overview

5. Revisions to IDC’s Strategy

6. Changes to objective and outcomes to reflect changing priorities and expectations To be “the primary driving force of commercially sustainable industrial development and innovation to the benefit of South Africa and the rest of the African continent” Vision The IDC is self-financing national development finance institution whose primary objectives are to contribute to the generation of balanced, sustainable economic growth in Africa and to the economic empowerment of the South African population, thereby promoting the economic prosperity of all citizens. The IDC achieves this by promoting entrepreneurship through the building of competitive industries and enterprises based on sound business principles. Mission Support industrial capacity development Lead industrial capacity development Objective • Primary: Facilitate sustainable direct and indirect employment • Secondary: • Improving regional equity, including the development of South African rural areas, poorer provinces and industrialisation in the rest of Africa; • Growing the entrepreneurial and SME sectors • Expansionary and/or broad-based black economic empowerment • Environmentally sustainable growth • Growing sectoral diversity and increased localisation of production • Primary: Facilitate sustainable direct and indirect employment • Secondary: • Improving regional equity, including the development of South African rural areas, poorer provinces and industrialisation in the rest of Africa; • Growing the entrepreneurial and SME sectors • Transformational impact on communities and growing black industrialists • Environmentally sustainable growth • Growing sectoral diversity and increased localisation of production Outcomes Values Passion Professionalism Partnership

7. Leadership in Industrial Development – 2013/14 onwards Increasing Industrial Development Impact Ensuring Long-Term Sustainability Financial Capital Human, Social, Natural and Manufactured Capital • Strengthen sector development objectivesand strategies • Align IDC with the sector objectivesof NGP and IPAP • Increasedproject development and implementation • Provide industrial finance to further achievement of sector development objectives • Increaseregional industrial integration through the development of value chains • Ensure effective and efficiently operating sefa • Plan investment return and risk profile to ensure sufficient growth to replace existing cash generators • Ensure that appropriate pricing and fee structures are in place • Manage risk through appropriate investments, pricing and management of the portfolio • Human resources • Ensure appropriately skilled and capacitated human resources • Stakeholders • Improve customer service • Build partnerships with other financiers to leverage off different strengths and mandates • Increase engagement with sector players to identify opportunities • Strengthen IDC expertise to shape and influence policy • Build strong communities around projects that IDC fund • Natural environment • Reduce IDC’s negative environmental impact • Reduce industry’s negative environmental impact • Utilisation of resources • Improve efficiencies through improved systems and processes Priorities have been revised and the strategy has been repackaged to emphasise the balance between increasing IDC’s impact and ensuring sustainability

8. Leading Industrial Development by Driving Implementing the NGP and IPAP

9. Context of IDC’s strategy • IDC is one of the main drivers of the implementation of the New Growth Path (NGP) and Industrial Policy Action Plan (IPAP); • Over the past two years, it has been aligning its operations to support the priority sectors identified by these policies. Logistics, infrastructure and cross-sector projects The green economy • Logistics • Industrial infrastructure • Green and energy saving industries • Bio fuels Tourism, creative industries and high-level services • Craft and film • Biotechnology • Business process services Agricultural value chain • Tourism • Agro-processing • Forestry, paper & pulp, furniture • Mining related technologies • Healthcare • ICT Manufacturing activities • Automotives, components, medium and heavy commercial vehicles • Metals fabrication, capital and transport equipment The mining value chain • Mining • Downstream mineral beneficiation • Advanced manufacturing • Plastics and chemicals • Clothing, textiles, footwear, leather • Pharmaceuti-cals • Oil and gas

10. Sectoral focus areas –Resources • Mining and Minerals Beneficiation • Steel and steel related inputs • Early stage project development of mining linked to beneficiation • Rest of Africa • ‘New age’ minerals • Agro-Industries • Localisation • Land utilisation • Innovation • SHIP • Industrial infrastructure • High impact logistics • New sector development • Lines of credit and end-user finance • Green-Industries • Energy efficiency • Renewable energy • Fuel based green power • Emissions & pollution mitigation • Bio-fuels

11. Sectoral focus areas –Manufacturing • Textiles • Conducive environment • Competitive local / regional value chain • Stabilise major IDC investments • Forestry and Wood Products • Forestry • Sawmilling • Pulp and paper • Value added products • Chemicals • Mineral Beneficiation • Agricultural inputs • Infrastructure Inputs • Oil and gas • Develop plastics value chain • Metals • SOE Capexprogram • Tooling, die and mould industry • Foundries • Automotive components • Medium and heavy commercial vehicles,

12. Sectoral focus areas – Services • Tourism • Underdeveloped tourism nodes suitable and affordable to the domestic market • Rest of Africa • ICT • Broadband • ICT Green • Electronic sector • Healthcare • Pharmaceuticals • Medical Devices • Hospital PPPs • Media • Film production • Production infrastructure development • Audience development • Animation Hub • Pan African Television Broadcasters

13. Sectoral allocation Capital Allocation – 2013/14 to 2017/18 By IDC Business Unit By NGP Jobs Driver • In line with its focus on industrial development, the manufacturing industry, driven mainly by the metals and chemicals industries will receive the largest share of IDC’s allocation; • The mining value chain, green industries and agricultural value chain are also expected to contribute significantly to funding over the next five years.

14. Leading Industrial Capacity Development The impact of IDC playing a leading role is illustrated in the following slides

15. Case Study: Localising manufacturing of components for the renewable energy build programme DCD Wind Tower Factory After feasibility studies proved the viability, IDC is co-investing with DCD, a local company to set up a facility to build towers for wind turbines in the Coega IDZ. This investment was made possible by the Renewable Energy Procurement Programme which allocated 1 850MW to onshore wind projects. The Eastern Cape is a well suited location for the project given that the bulk of the wind power generation projects that has preferred bidder status is located in this province. The project will create 203 permanent jobs and increase localisation of components for renewable energy generation projects.

16. Case Study: Localising manufacturing of automotive components MSSL Global RSA Module Engineering Limited The company manufactures plastic moulded components for local motor vehicle assemblers such as Toyota, Nissan and Ford. Given the drive to increase local production of motor vehicle components, the Indian based company will be setting up a factory in Durban to manufacture Interior and exterior plastic components. The products that will be produced used to be imported previously. 450 additional people will be employed by the company as part of the expansion and the project will add to the downstream beneficiation of plastics.

17. Case Study: Ensuring competition in the supply of steel Scaw Metals Scaw, a company operating in the steel industry, employs about 6 800 people in with four divisions manufacturing grinding media, wire rod products, cast products, and rolled products. The grinding media division is the only large scale African manufacturer of grinding media used in mining industries, with the wire rod products division manufactures specialised rods and chains destined for the mining and construction sectors. The cast products division manufactures specialised products also targeting the mining, rail and power generation sectors and the products manufactured by the rolled products division are destined for the mining, infrastructure, construction and power generation sectors. IDC acquired Scaw from Anglo-American PLC in 2012 in pursuit of its strategy to intervene in the South African steel industry to ensure competitively priced steel supplies to downstream industries and increase localisation. Scaw is well positioned to capture growth in the mining, railway and power generation sectors. Scaw is the only producer of locomotive frames in Southern Africa and one of a few in the world.

18. Case Study: Establishment of new industries Bioethanol IDC is the sole shareholder in a R2 billion project to produce bioethanol in the Eastern Cape; The project will construct a 100 million litres per annum bioethanol production plant utilising grain sorghum as feedstock; This will be the first significant production facility for biofuels in the country and will create jobs for 3 200 people during the construction and operational phases in a rural area in a poor province; The project is at a phase where it will start to source equipment needed for construction.

19. Case Study: Establishment of new industries Conduct Telecoms Conduct Telecommunications builds, owns, manages and leases last mile dark optic fibre using an open access model. The company previously approached the IDC to fund pilot sites for their network. These sites have been completed and is participating in funding the roll-out of additional sites. 109 jobs will be created during the installation of the cables. The company is increasing broadband penetration.

20. Balancing increased impact with sustainability of investments

21. Sustainable development impact Impact Sustainability

22. Balancing a greater impact with sustainability • Increasing its industrial development impact should be done responsibly and the corporation needs to consider the following: • Increasing leverage of funding from other sources including private sector financiers and other DFIs; • Ensuring that our projects and clients are sustainable: • Maximising the direct impact on communities; • Development of small business to further increase the impact; • Monitoring and managing investments to identify potential problems at client businesses and intervene timeously where required; • Identify opportunities for growth to increase clients’ development impact; • Minimising the negative impact that projects have on the environment; • By ensuring client sustainability, job creation is guaranteed and IDC’s financial sustainability is strengthened.

23. Sustainable communities and regional equity IDC Offices • Several of the sectors that IDC support have a strong direct or indirect presence in rural areas. • These include agro-processing, tourism and mining among others. • IDC is strengthening its processes to ensure that projects deliver the maximum benefit to local communities. • Part of this includes the development of SMEs that take advantage of the benefits that the project brings to the area. In this regard, sefa will play an important role in the future.

24. Case Study: Rural development through agro-processing Russellstone Soy Crushing Plant The project comprises the development of a green-fields soya crushing facility in the Bronkhorstspruit Industrial Area. The plant will have a capacity of c.a. 240 000 tons per annum and will convert soya beans into high quality soya oil cake, soya hulls, and crude soya oil for distribution into the animal feed and industrial sectors.This will be the first dedicated oil cake focussed commercial-scale soya crushing facility in South Africa replacing c.a. 240 000 tons of imported soya cake per annum, creating 48 permanent job opportunities, and having a direct and beneficial impact on the local cultivation of soya beans.The project will require the dry-land cultivation of ca. 104 000 ha soya, which would also promote disease management and improve soil nutrition if used as part of a rotational crop.The indirect employment impact in the agricultural sector is conservatively estimated at 1 040 jobs.

25. Case Study: Development of value chains benefiting rural areas Coega Cheese In 2011, IDC approved funding for the establishment of a dairy in the Coega IDZ. The project is operating and IDC was more recently approached to provide funding for the establishment of a cheese factory adjacent to the dairy. The project is further beneficiating agricultural projects in addition to the value-add that the dairy already provided, with an additional 46 jobs being created.

26. Case Study: Funding for renewable energy IDC Participation in Rounds 1 and 2 of the Renewable Energy Procurement Programme IDC is one of the largest funders for projects qualifying under the first two rounds of the REIPP programme. It will continue to participate, ensuring that localisation and community development around projects receive the highest priority.

27. Environmental impact • DFIs across the world are playing a leading role to transform economies to be less energy intensive. • South Africa has one of the least energy efficient economies in the world. • Recent and expected future electricity price increases are impacting the competitiveness of local industry negatively. • In addition to energy and the resulting carbon emissions, several other natural systems, including water is also being put under pressure. This is specifically important for a water-scarce country such as South Africa. • Given IDC’s close association with industry and the fact that this is a fairly new market, it is in a prime position to assist in providing funding to businesses seeking to realise the benefits of improving processes and equipment to lessen their impact on the environment. • To achieve this, the organisation has already launched the Green Energy Efficiency Scheme, but plans to further improve processes to entrench an approach that considers environmental impacts in all its approval and monitoring processes.

28. Rural development through agro-processing SA Calcium Carbide SA Calcium Carbide, located in Newcastle, is the only producer of calcium carbide in Africa. IDC previously provided funding for the company to assist with the installation of a co-generation facility, utilising furnace off-gas currently being flared, to reduce the company’s reliance on the national grid for electricity. The project has been successfully commissioned and the company more recently approached IDC to provide funding for an additional initiative aimed at removing and destroying cyanide from waste water.

29. Increasing capacity in the recycling industry Bon Accord Recycling Facility One of the country’s largest waste management services companies approached IDC to set up a semi-automated material recycling facility at a landfill site in Pretoria. The transaction will create 33 jobs with the potential for 30 more if an additional shift is introduced. The company will be able to process 6 000 tons of waste per month and recover paper, plastics and glass in the process.

30. Partnerships and collaboration • In order for IDC to achieve its goal, it needs to work with other organisations. To this end, the corporation has been partnering with various role-players to fulfill its mandate and increase its impact. • dti- Industrial development impact through the management of special schemes such as the Clothing and Textiles Competitiveness Programme (CTCP) and Manufacturing Competitiveness Enhancement Programme (MCEP); • Whole school programme – IDC targeting 20 schools across the country in support of the Basic Education Accord. Depending on the individual needs of each school, the IDC’s intervention could include leadership training; building of science laboratories; teacher development in technology and extra lessons for maths and science; • Various Provincial Governments – Increasing rural development by working with provincial govenments to roll-out the Nguni Cattle project; • Association of African Development Finance Institutions (AADFI), SADC-Development Finance Resource Centre (SADC-DFRC); individual DFIs on the rest of the continent – Assisting with capacity building and providing lines of credit to assist DFIs in the rest of the continent to fund development; • Business Community – Recently concluded the IDC BMF sefa Business Plan Competition in conjunction with the Soweto Branch of the Black Management Forum – competition to be rolled-out to the rest of the country; • Land Bank – Working closely with Land Bank, including utilising them as an intermediary for IDC funding, to better reach rural areas and assist with the development of primary agriculture. • The Nguni Cattle Project • The primary focus of the project was to empower previously disadvantaged emerging commercial farmers • establish a viable supply of organic beef for the growing local and international market • The project engages traditional farmers in the breeding and conservation of indigenous livestock • Each community receives pregnant Nguni heifers and Nguni bulls • All members of the communities are involved in the concept of “passing on the gift” where communities are required to return 10 heifers and 2 bulls from the offspring within 5 years.

31. Financial sustainability IDC’s Funding Model • By managing its clients better, IDC can improve their performance resulting in a more successful client base. • This will result in more sustainable clients and a more sustainable development impact. If risks in businesses are identified early enough, interventions can be made earlier and turnarounds implemented in time to save the business. • IDC currently subsidises certain debt funding costs with equity returns. As IDC plans to dispose of equity investments to commit capital to new ventures there is a need to find ways to replace existing mature investments with new investments that deliver suitable returns. • To reduce the potential impact on IDC’s loan prices, IDC will increase its sourcing of lower-cost funding. IDC relies on borrowings, internal profitability, capital growth and exits from mature investments to maintain and expand its funding ability

32. Targets

33. IDC Targets for 2013/14

34. IDC Targets for 2013/14 (continued)

35. IDC’s portfolio

36. IDC’s Portfolio as at 28 February 2013 By Region By Industry • IDC’s participation in the renewable energy procurement programme has made a large impact on its portfolio in especially the Northern Cape and Eastern Cape; • Mining continues to play a major part in IDC’s development activities given the importance of the sector both locally as well as in the rest of the continent. 100% Agriculture, forestry & fishing 5% 6% Eastern Cape 1% Free State 90% Mining 24% Gauteng 26% 80% Food and beverages 70% 4% Clothing, textiles, leather and footwear 11% 7% KwaZulu Natal Wood, paper, printing and publishing 60% 2% Petroleum, chemicals, rubber plastics and non-metallic minerals Limpopo 7% 9% 50% Mpumalanga 4% Basic metals 11% North West 12% 40% Fabricated metals, machinery and equipment 5% Motor vehicles and transport equipment 30% 3% 11% Other manufacturing Northern Cape 1% Electricity and water supply 5% 20% 8% Construction, transport, catering and accommodation Western Cape 9% Communication and business services 10% 8% 16% Outside SA Medical and community services 7% 0%

37. Thank you Industrial Development Corporation 19 Fredman Drive, Sandown PO Box 784055, Sandton, 2146 South Africa Telephone 011 269 3000 Facsimile 011 269 2116 E-mail callcentre@idc.co.za