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IDC to enter bond market

Geoffrey Qhena,
Johannesburg, South Africa — MININGREVIEW.COM — 03 July 2009 – The Industrial Development Corporation (IDC) – South Africa’s state-owned lender – says it will enter the bond market for the first time in 20 years, as it struggles to obtain funds from banks and external development financing institutions.

Revealing this here, chief executive officer Geoffrey Qhena said the IDC had received loan applications of R2.5 billion rand from distressed companies, mainly in the mining, metals and  motor  industries.

The lender plans to extend R11.4 billion in loans in the year to 31 March 2010, up from R10.8 billion rand in the past year, Qhena confirmed in a phone interview with Bloomberg News. “The IDC is considering selling bonds for the first time in “several years” to raise loan funds, and will also seek credit lines from other development finance institutions,” he added.

“We plan to increase the level of gearing significantly going forward,” said IDC chief financial officer Gert Gouws at the announcement of the group’s results for the year to 31March 2009.

The structure of the IDC’s source of funds will also change. The development finance group will source about half of its funds from new bond issues. Just over a third of funding will be sourced from banks, while the remainder will come from external development finance institutions such as the African Development Bank.

“The availability from banks and development finance institutions is just not there,” said Gouws. He added that South Africa’s ability to source money from these institutions was limited because they focused on poorer countries.

The funds will be used to ramp up the IDC’s investment budget to R71billion over the next four years. An additional R15billion has been budgeted for investment into the rest of Africa for the same period.

The IDC hopes to create 180 000 jobs through its development funding efforts until 2014, and save 30 000 by assisting distressed companies.