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IDC plan to boost industrial expansion
Offshore borrowings and share sales will provide funds of R35bn, writes SVEN LUNSCHE
To finance the programme, the IDC is examining offshore borrowings which could total around R10-billion. It will also embark on a multi-billion-rand sale of its extensive portfolio of listed and unlisted investments. The projects, which are already in construction or have reached feasibility study status, are at the forefront of the IDC's development plans. A further two to three dozen ventures are being examined for future investment, while the IDC is also continuing to fund small and medium-sized enterprises. The IDC's new head, Khaya Ngqula, and other executives recently visited Europe to brief the IDC's foreign bankers about funding requirements. Next week an IDC team is going to the Far East for similar discussions with Japanese banks. Gert Gouws, general manager, finance, will not detail the funding plans but says the group will rely on a combination of internally generated cash flows, borrowings and share realisations to finance the expansion plans. He says the funding plans have been well received by the corporation's bankers. Gouws says the IDC wants to reduce direct participation in funding new projects, "but retain an important catalyst role, mobilising other investors to participate". He confirms that the IDC "will divest from its mature investments at the opportune time to assist with the funding of the new projects". The listed investment portfolio comprises holdings in leading industrial stocks Sasol, Iscor and Gencor, valued at R4.6-billion last June but now worth almost R6-billion. Investments in unlisted companies include Columbus Steel, Atlantis Diesel Engines, Siemens and Steinmüller. The IDC's role is to promote the development of industrial and agricultural projects in conjunction with private sector partners. In the case of the projects listed, the IDC or its subsidiaries would have a shareholding of 20%-50%. The projects rely on equity and loans to finance capital costs. "In addition to traditional loan financing and import credit funding, we will require financiers to provide project funding in the from of equity, quasi-equity or loans directly to projects on a limited-resource basis," Gouws says. Heading the list of projects is the Saldanha steel mill with a peak funding requirement of R6.8-billion for next year. Projects under consideration include the Maputo aluminium smelter (led by Gencor with peak funding of $1.3-billion in 2001), an iron direct reduction plant in Maputo or Phalaborwa (R5.1-billion in 2001), the Palmag project in Phalaborwa (R4.5-billion) and a zinc refinery in East London or Port Elizabeth ($670-million in 2000). The IDC's expansion plan ties in with a renewed surge in fixed investment spending by public- and private-sector corporations. According to Nedcor's latest Capital Expenditure Project Listing, 211 new projects worth R74-billion were announced last year, 32% up on 1995. Capital expenditure plans for the next 10 years totalling R187.5-billion (at constant prices) are contained in the Nedcor listing. The listing is dominated by Telkom's R53-billion Vision 2000 project but includes a further 74 projects valued at over R200-million and 30 projects with a capex of over R1-billion. In 1997, projects valued at R50-billion are envisaged, followed by R42-billion and R35.5-billion for 1998 and 1999 respectively.
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