The Industrial Development Corporation (IDC) confirmed on Wednesday that it had already spent more than R800-million to assist "distressed" companies affected by the domestic economic slowdown, and confirmed that it had set aside a total of R6,1-billion for the next two years to assist others through the economic crisis.

Some R500-million of the money already disbursed was committed in its 2008/9 financial year, with a further R300-million approved since April. So far, a total of 19 companies had benefited from these bail-outs, across a range of sectors.

The State-owned development finance institution (DFI) also reported a strong 27% increase in funding approvals for the year ended March 31, 2009. In fact, approvals rose to a record R10,8-billion, with funding in the rest of Africa rising 38% to R2,9-billion.

CEO Geoffrey Qhena said that the IDC intended to inject more than R70-billion into the economy over the next five years, but he also indicated that it would also have to increase its borrowings to meet that target.

In fact, CFO Gert Gouws indicated that the bank would raise its gearing from its current level of around R6-billion, or an 8% debt-to-equity ratio, to nearly R25-billion, or a 35% debt-to-equity position, by 2013.

R14BN BOND PROGRAMME

The bulk of this capital, up to R14-billion, would be raised through the issuance of bonds, with the IDC considering both domestic and global programmes.

Gouws indicated that it would be raising between R3-billion and R4-billion a year between 2010 and 2013, with the first issuance likely during 2010.

However, in an interview, Qhena indicated that the bank was also considering a R2-billion private bond placement either later this calendar year, or early next.

Gouws said that the balance of the borrowings would be sourced from other international DFIs, such as the African Development Bank and the European Investment Bank, and commercial banks.

But DFI sources would probably be limited to between 15% and 20% of the R25-billion total, owing to the fact that South African DFIs only had limited access to concessional finance, which was reserved primarily for poorer countries.

The balance of the funds would be sourced from commercial banks, with Gouws indicating that the IDC was keen to explore new sources, highlighting the recent competitive loan package secured from the China Construction Bank.

Last year, the corporation's capital base declined substantially as a result of the downturn in the market, resulting in a fair value adjustment of about R20-billion year-on-year. The value of its investments in listed and unlisted enterprises currently stood at R53-billion, down from R73-billion in 2008.

Despite this decline and increased investment budgets, the IDC insisted that it remained financially sustainable and well positioned to play a strong developmental role through the financial crisis.

In fact, its revenues surged 105% to more than R14,9-billion, on the back of a strong performance from Foskor, a phosphate rock miner and phosphoric acid producer in which the group had an 85% position - this holding would reduce to around 59% in the coming weeks when a black economic-empowerment deal would be announced.

The IDC also reported record profits of R5,6-billion, up 42% on the R3,9-billion reported for 2008, but Gouws was quick to stress that the performance would not be repeated in the 2009/10 financial year.

He also highlighted a 183% rise in impairments to nearly R1,2-billion, from R420-million in 2008, which saw impairments as a percentage of its total financing costs rise to 5,3%.

But Qhena acknowledged that financing risks would become more acute, particularly given the deterioration of its loan book and the value of its listed and unlisted investments.

Earlier, Trade and Industry Minister Dr Rob Davies had argued that, while there was scope to make more strategic use of the IDC to advance industrial development, especially through the provision of finance at attractive rates, government would have to pay "serious attention" to its balance sheet.

The Minister added that the State should be prepared to consider options for the strengthening the IDC's capital base.

But, given that South Africa had descended into its first recession in 17 years, much of the current focus was on assisting companies affected by the economic slowdown, and on funding interventions that will help create and preserve jobs.

The IDC estimated that its approved funding activity would facilitate the creation or save more than 25 000 direct jobs in South Africa, which was lower than the 30 000-plus levels of the prior two years.

Qhena stressed, too, that its support, which was being considered on a firm-by-firm basis, would be premised on an assessment of the potential of distressed enterprises to recover with the market.

But, he refrained from providing details on the companies receiving support, and said that it would be premature to comment on whether it would definitely support Frame, South Africa's largest textiles manufacturer, employing 1 400 people, which government had indicated it would like to see salvaged.