Page 26 - IDC

6 CITY PRESS, 15 MAY, 2016

Richelle E Goodrich: If you invest

nothing, the reward is worth little

MONEY INVESTED SECTORS THAT BENEFIT: BUSINESSES FUND D DDEDSI SSEE
E FS
NEY INVE
Invested the past 20 years
The IDC hopes to invest In the next five y ears

R B ILLION
R100 b
Next five years: R100 billion 50

Last year: 210 0
e
FY 2015: R11.5 billion
40 Past five years: 1 1 58
Past 5 y ears: R60 billion
Past 10 years: 2 1 61

Past 10 years: 98 billion 30
Past 20 years: 5 5 13

Past 20 years: R143 billion

20 JOBS CREATED

10

Next five years: more than 100 000 jobs
0
FY 2015: 20 000

PHOTO: ELIZABETH SEJAKE Metals achinery y Mining g Chemicals s manufacturing g Agriprocessing g Other services s Tourism m Past 10 years: 282 000
Past 5 y ears: 138 000

s
etroleum
Other
m
&
& p Past 20 years: 450 000
COBUS PRINSLOO, Graphics24
NICKI GULES
nicki.gules@citypress.co.za
f Geoffrey Qhena, the CEO of the Industrial Needed: Businesses to
Development Corporation (IDC), was an
entrepreneur with R5 million to spare, his
investment decisions would surprise you.
He believes that South Africa and the rest of the
Icontinent present a world of opportunity, but only
if you know where to look.
“If I was an entrepreneur, I would invest 50% in drive the SA economy
manufacturing. I would invest half of the remainder in
tourism, and the other half in new industries: things that
we see as tiny now, but which we will see getting bigger
into the future,” he says.
Although spending the bulk of his fictitious
entrepreneur’s budget on manufacturing may sound risky
to some, to Qhena it makes perfect sense.
textile industry for targeted markets with low-volume, ’’
“We have resources here in South Africa, most of The IDC is looking for a new generation of black
which, by and large, you can source for manufacturing.
We are very close to the markets that are very
underdeveloped, which is the rest of the African entrepreneurs to make stuff, people who are willing to
continent. So those two, for me, make sense,” he says.
“Let’s say I want to manufacture furniture. We have roll up their sleeves and get their hands dirty
forestry here, and also on the rest of the continent – it
depends on the type of wood you need. I look into the
continent and it is developing housing, proper housing,
and there is a demand for furniture, with the growth of
the middle class, so that gives you that market.” OPINION
There are other unexploited opportunities in the sector,
such as equipment manufacturing, which is only done in
South Africa and, to some extent, Egypt. One can easily MEASURING THE IDC’S SUCCESS
spot this by examining where the steel plants are. But to
many, steel is now a dirty word.
“I know the steel story is probably not the best now If I was an South Africa has experienced low But is this the most important measure principles. By developing industrial
because it goes through different cycles, but it’s because economic growth rates in the past five of success for us at the IDC? capacity, the IDC achieves specific
we have not focused on the infrastructure requirements entrepreneur, I would years as a result of numerous factors: Not really. I’m not saying profitability outcomes. The most important of these is
on the continent,” he says. from supply-side constraints isn’t an important metric for the IDC. It is to enable job creation through the
Manufacturing also has, he says, a lot of legs, “but you invest 50% in such as rising costs, through critical that we make a return on our companies we fund.
can’t just do it naively”. to demand-side investments to ensure our long-term self- Focusing though on trying to find
Qhena cites premium just-in-time manufacturing in the manufacturing. I would challenges such as high sustainability. short-term measurement metrics to
invest half of the A household As a development finance institution, measure whether we have been successful
high-value outputs and tight deadlines, as one such indebtedness. our mandate is broader than just in any given year misses the point of
example of how entrepreneurs involved in traditionally remainder in tourism, PROJECT IN In these ensuring the profitability of the business. what the IDC aims to achieve. We look to
struggling sectors can make things work for them. uncertain times, It is about making sure we contribute make long-term investments in businesses
“So it is really where in the manufacturing sector you and the other half in new PARTNERSHIP how then should to the long-term success of the South that the private sector finds too risky.
position yourself,” he says. “You have to be responsive, we be measuring African economy by providing finance to We are also very mindful that we don’t,
efficient and quick. You have to also be conscious of your industries: things that WITH THE the success of the those businesses that are unable to secure as an institution, crowd out private sector
cost structure. You have to find better, more innovative, Industrial capital from commercial entities such as investors. Rather, we want to create a
ways of manufacturing. You have to look for niche we see as tiny now, but Development banks. market in which the private sector can
markets. You have to be modern.” IDC Corporation (IDC)? In so doing, the IDC contributes to the play a role at a later stage.
Tourism makes a lot of short-term sense to Qhena which we will see Reporting our results creation of balanced, sustainable I am confident that within our portfolio
because of the favourable rand/dollar exchange rate. And, for the 2015 financial year, economic growth in South Africa and on there is at least one business that is the
provided you are not wanting to enter the hotel or getting bigger into the our 75th year in existence, you the rest of the continent. We want to next South African industrial champion
accommodation business, it needn’t take that much could look at the IDC’s bottom line promote entrepreneurship through the that has its roots with the IDC. And that
capital. future and say, yes, we have been successful, building of competitive industries and will be the measure of our success.
“Look on the experiences side,” says Qhena. “The other having reported R11.5 billion in approvals. enterprises based on sound business Qhena is the CEO of the IDC
day I was in Soweto and I saw this guy on a quad bike,
and behind him were 15 tourists all on quad bikes,
interacting with people on the street. It’s different, it’s
niche,” he says. Also on his Hot list is gas, which is cheaper and more long term. In terms of the infrastructure we need on the
There are also a significant number of new industries environmentally friendly than coal and freely available in continent, even us in South Africa, at the back of that we
to choose from, including the energy storage industry, Mozambique, next door. need lots of steel.”
which involves bigger and better batteries such as those Positively scorching is agroprocessing, “because people The IDC aims to fund entrepreneurs willing to get stuck
which Elon Musk’s company, Tesla, is manufacturing right R100bn will always eat, whether they can afford to or not”. into these and other industries to the tune of R100 billion
now. These can solve a variety of problems, from “If you look into the continent, you will find that very in the next five years and, in so doing, it hopes to help
increasing the distances electric cars are able to drive, to little processing is being done. create 100 000 jobs.
saving the energy power stations produce at night, which “There is lots of land for planting and, in many areas, Of that, R600 million has been earmarked exclusively
otherwise goes to waste. lots of rain, unlike South Africa. But there is very little for young people and a further R600 million for women.
“We have lots of platinum and we need to create a processing, and the input costs are not as high as heavy And to make it all happen, the IDC is looking for a new
market, so we have fuel cells here that can use it, which THE AMOUNT THE IDC WILL USE TO FUND ENTREPRENEURS manufacturing.” generation of black industrialists, but no chancers need
we are looking at,” Qhena says. WILLING TO CREATE VIABLE INDUSTRIES IN THE NEXT Tourism is also in the Hot column, as is manufacturing, apply.
There are also many opportunities in the provided it is “focused and targeted, and there is a solid “There are different types of people – there are people
pharmaceutical industry for those who are able to make FIVE YEARS AND, IN SO DOING, IT HOPES TO HELP CREATE niche market”. who want to be investors, that’s okay, but we want
cheaper medicines, which governments across the MORE THAN 100 000 JOBS Qhena is not that comfortable about a Not Hot column. people to make stuff. If we have somebody who is going
continent will better be able to afford. He prefers Lukewarm. to sleep peacefully when the business is not working,
New industries, Qhena says, are critical. There he places mining, where there is no clear while I as the funder have sleepless nights, then that is
“If you don’t as a country constantly reinvent yourself, In his Hot column, Qhena places renewable energy, beneficiation of the raw material. The days of shipping not a black industrialist.
you are going to be left behind,” Qhena says. “I was at because the country still needs plenty of power despite unprocessed minerals abroad and thinking that is a viable “We need people who are willing to fold up their
the World Economic Forum in January and they were the fact that two giant coal-fired stations are coming proposition are over. The exception, though, is coal, sleeves and get their hands dirty, and get involved in the
speaking about the fourth industrial revolution, and that online soon. which is needed by Eskom. Steel is also under Lukewarm. business, and not sleep when the business is slow. People
was innovation.” “There are also opportunities on the continent, because “These things go through cycles and you have to have who are really committed to doing this thing. We need
So which sectors are hot for entrepreneurs at the some places have even better sun than we have, and deep pockets. All these major capex projects need long- industrialists in the true sense of the word,” emphasises
moment, and which are not? plenty of water for hydroelectricity.” term views. In the short term, steel is cold, but not in the Qhena.