LIMPOPO DEPARTMENT OF ECONOMIC DEVELOPMENT, ENVIRONMENT AND TOURISMThe heartland of southern Africa – development is about people!

2015

ICT YOUTH CONFERENCE

MALOSE MAKGETA- SENIOR REGIONAL OFFICERPolokwane - Limpopo ProvinceLimpopo ICT Youth Conference

25 March 2015Funding of sustainable ICT projects

Industrial Development Corporation of SA

MALOSE MAKGETA- SENIOR REGIONAL OFFICER

Polokwane - Limpopo Province

Limpopo ICT Youth Conference

26 March 2015

Funding of sustainable ICT projects

3

PURPOSE OF PRESENTATION

Provide background on IDC corporate profile & mandate

Elaborate on IDC financing Criteria

Give an overview of the IDC Business Application process 

Put more emphasis on IDC Gro­e Youth fund

Overview of IDC ICT Business Unit

4

BACKGROUNDo Established: 1940

o Type of organisation: Development Finance Institution (DFI)

o Ownership: State owned company, 100% owned by the SA government

o Funding status: Self financing, pays dividends and income tax

o Main business area: Providing funding for entrepreneurs and projects that are contributing to industrialisation and job creation

o Geographic activities: South Africa and the rest of Africa

o Products: Custom financial products to suit a project’s needs including debt, equity, guarantees or a combination of these

o Stage of investment: Project identification and development, feasibility, commercialisation, expansion, modernisation

5

Vision, mission, objective and valuesVa

lues

Visi

on 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”

Mis

sion

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.

Obj

ectiv

e

Lead industrial capacity development

Passion Professionalism Partnership

Primary: Facilitate sustainable direct and indirect employmentSecondary:• 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

Out

com

es

8

• Funding can be structured utilising a wide array of instruments including:• Debt;• Equity;• Quasi-equity;• Guarantees;• Trade finance;• Bridging finance;• Venture capital.

• The funding will be structured in a way that will suit the business’ needs most appropriately. Structuring options include:

• Term of the funding: Short, medium and long-term loans are available;• Grace periods for repayment : Repayments can be structured to suit cashflows and allow for periods

where no payments need to be made on either capital or interest;• Flexible security requirements: In most instances, very little security is required for small business

applications• Special funding schemes are available that offer more attractive terms and targets cross sectoral issues

such as job creation or development of specific sectors. Also include funds managed on behalf of other organisations, largely the dti;

• IDC’s business support programme addresses non-financial support to entrepreneurs.

IDC’s funding products

Funding of R1 million and more

9

Financing Criteria BEE acquisitions of existing business must be

expansionary buy-in, not pure sale of shares, or control acquired by HDPs. HDPs must be involved in management

Projects in with the following sectors or with the following characteristics are NOTconsidered:

– Pure retail (including Franchising)

– Property development (esp. Residential)

– Primary agriculture (Only Long Term Crop)

– Liquor, Tobacco, Gaming, Gambling and related

– Environmentally non-compliant

11

Managing IDC: Deal origination, assessment and post-investment: Funding process

Applications from existing/

prospective businesses

Proactive identification and development of

projects

Pipeline Assessment and decision

Detailed due-diligence/feasibility study assessing development impact and sustainability of

opportunities:• Development outcomes• Market for products/services• Technical viability and

competitiveness• Financial viability• Management• Legal• Environmental impact• Etc.

Implementation and monitoring

Structuring of funding depending on client’s needs

Approval of viable transactions at appropriate committee

Ongoing monitoring of client performance after funding is

disbursed

Interventions in businesses experiencing difficulties

• Business support• Restructuring of facilities• Etc.

More emphasis being placed on early stage

involvement and development of

projects

Legal agreements

Meeting conditions

Disbursement

Screening

Basic assessment

Pre-feasibility

12

Basic Assessment

Due Diligence Feasibility Study

Decision-making (Investment Committee)

Legal Agreements

Disbursement

Post-investment Management

Initial Screening

Engagement letter MOU/Co-operation Agreement

Business Application Process

13

Special Funding Schemes

14

Development Funds Department

Transformation and E

ntrepreneurial Schem

e (TES

)

Annual Allocation €47m

HIGH DEVELOPMENT RING FENCED FUNDS

Support P

rogram for Industrial Innovation (S

PII)

Risk C

apital Facility (RC

F)

AnnualAllocation

Clothing &

Textiles Com

petitive Program

me (C

TCP

)

GR

EE

N E

NE

RG

Y E

FFICIE

NC

Y FU

ND

R 500 m

UN

EM

PLO

YM

EN

T INS

UR

AN

CE

FUN

D (U

IF)

R 2 b

IDC Business Support Unit

R 1 b

GR

O –

E-S

CH

EM

E

R 10 b

GR

OW

E Y

OU

TH S

CH

EM

E

AG

RO

PR

OC

ES

SIN

G LIN

KA

GE

S S

CH

EM

E (A

PLS

)R 100 m R 10 b

15

TES Structure

WomenEntrepreneurial

FundR 400 m

40%

Investment: R360mBus. Support: R40m

DevelopmentFund

R 250 m25%

Investment: R242,5Bus. Support: R7,5m

CommunityFund

R 150 m15%

Investment: R145mBus. Support: R5m

EquityContribution

FundR 150 m

15%

Investment: R135mBus. Support: R15m

People withDisabilities

FundR 50 m

5%

Investment: R45mBus. Support R5m

TRANSFORMATION AND ENTREPRENEURIALSCHEME

R 1 Billion

19

Background

Background

• On 18 April 2013 IDC signed the Youth EmploymentAccord in Soweto and pledged R1billion towards youthenterprise funding

• On 29 July 2013 a Memorandum of understanding(MOU)was signed between the IDC,NYDA and sefa

• The MOU outlines the establishment of a three-waypartnership to provide development funding for youth-owned businesses

• Through this collaboration, youth owned businesseswill be able to access IDC and sefa loans allocated foryouth as well as NYDA grants

20

Regional Development

Who qualifies:

• Start-up businesses, including funding for buildings, machinery and

working capital;

• Existing businesses for expansionary purposes;

• Over 50% ownership by persons under 35 years of age;

• Businesses that demonstrate economic merit and have prospects of

acceptable profitability to be able to service their obligation;

• For the duration of the funding period, businesses whose maximum cost

per job does not exceed R500 000 relative to the total funding required;

• Broad-Based Black Economic Empowerment certification from an

accredited verification agency, where applicable;

• Businesses operating or expanding in South Africa;

Gro-E youth Scheme

21

Regional Development

How the scheme works:

• Funding will be made available at prime less 3% to businesses that will

create jobs.

• A minimum of R1-million with a maximum of R50-million per project will be

allowed.

• The funding is available over five years or until the scheme is exhausted,

whichever occurs first.

• The first draw must be within one year from approval of funding. If not,

pricing reverts to normal IDC pricing.

• Reduced loan pricing will be available for five years, after which normal

IDC pricing will apply.

• Finance required in excess of the scheme’s limit can be accessed through

normal IDC funding.

• Pre- and post-investment support and mentorship will be provided where

needed.

Gro-E Youth Scheme

22

ICT SBU

The ICT SBU’s vision is to be the financials partners od choice:

• Telecommunications;

• Information Technology;

• Shared Service (Business Process Outsourcing);

• Green Initiatives (E-waste and demand-side management);

• Electronics; and

• Contract-based electrical.

23

Prospects

QUESTIONS AND COMMENTSI Thank you

Industrial Development CorporationSuite 18, Biccard Park Office Park43 Biccard Street , PolokwaneTel : 015 299 4080E-mail - maishibem@idc.co.za