The State-owned Industrial Development Corporation (IDC) put a brave face on a decline in financial disbursements during 2014, but acknowledged that it would not meet the R100-billion, five-year approvals target set for it by government in 2010.

The development financier disbursed R11.2-billion across a broad range of sectors during the year, which was well below the R16-billion reported in 2013. However, its approvals rose to R13.8-billion for the period, a 6% improvement on the prior year.

In 2010, Economic Development Minister Ebrahim Patel set a five-year approvals target of R100-billion as part of a counter-cyclical strategy for an economy struggling to recover and grow in the wake of the global economic crisis.

Patel acknowledged that the target had been a “challenging” one and indicated that it had since been revised into a “rolling” ambition for the coming five-year period.

Nevertheless, he stressed that cumulative approvals between 2009 and 2014 had still risen by 78% to R58.6-billion, when compared with the R33-billion approved in the prior five-year period. Disbursements, meanwhile, had more than doubled period-on-period, from R23-billion to R47-billion.

A failure to meet the approvals target was attributed to an inadequate project pipeline, which would be bolstered in the coming five-year period by the IDC taking a more “proactive” project-development role.

Patel stressed that the IDC currently had the balance sheet and the capability to be “more successful” in lifting its future investment, approval and disbursement levels.

CFO Gert Gouws said the group’s balance sheet, which currently had a debt-to-equity ratio of 20%, would be leveraged in the next few years, which would result in debt becoming a far more significant source of funding, particularly in light of falling dividend flows from unlisted investments.

Gouws indicated that the group would raise about R30-billion in the coming five years from various sources, including the bond markets, other development finance institutions and commercial banks.

The IDC expected to increase its debt-to-equity ratio to 30% over the period and was planning a fresh R1.5-billion bond issuance in October, utilising its Domestic Medium-Term Note Programme.

Gouws was also not overly concerned about the fact that the IDC’s capital raising would occur within a rising interest-rate cycle. He estimated that interest rates would probably increase to about 1.5% above current levels over the period.