The Industrial Development Corporation (IDC) has managed to slash its impairments and write-offs further during the 2021 financial year, even though the persisting impact of the Covid-19 pandemic and the July 2021 civil unrest wreaked havoc on businesses.
The IDC yesterday said that impairments and write-offs stood at R1.7 billion for the financial year ending March 31, 2022 down from R2.2bn and R7.7bn in the previous two financial years, respectively.
IDC’s chief executive TP Nchocho said Covid-19 lockdown restrictions, supply-chain disruptions, and the unrest in KwaZulu-Natal and Gauteng in 2021 had negatively impacted businesses funded by the IDC.
However, Nchocho said the state-owned development financier did not go on a massive liquidation of companies and had instead given them a holiday moratorium for repayments until they could get back on their feet.
“We have more than R8 billion of exposure to that segment of the tourism market. Those businesses were closed, but we chose to stay by the customers. And now that the economies have opened up, we need to be more patient to allow them to re-establish themselves,” Nchocho said.
“That is why when you look at the numbers, the figure that shows how we were affected is the level of impairments which remain relatively high, but we are hoping it will begin to taper down in the coming years because it has stabilised, it is not spiking up.”
Nchocho added that under such an economic and trading climate, it was inevitable that the IDC would have to write off some of the debt owed by businesses.
“We have written off some debt. If you look at our accounts, there are amounts that have been written off, I think the total write-off for this financial year was about R1.7bn,” he said.
“But our operating profit was somewhere in the order of about R8 billion, so we could absorb the write-offs.”
The IDC ended the year with a cash balance of a R7.4bn and operating profit of R3.9bn.
IDC chief financial officer Isaac Malevu was bullish about prospects in the year ahead, saying the development financier had grown its capital base to R109.7bn due to the upwards valuation of its listed and unlisted portfolio.
Malevu said the IDC’s performance in 2021/22 reflected its resilience and determination to strengthen its financial sustainability and turnaround from a group loss of R33 million in 2020/21 to R6.3bn in the current year, generating a R2.7bn profit at company level.
“We remain fully aware of the investment risks created by a challenging environment. We have also amplified our post-investment and client support programmes, just so we can optimise the value of our unlisted book,” Malevu said.
For the year under review, the IDC approved funding amounting to R16bn, a 146 percent rise from the R6.5bn approved in the previous year.
However, disbursements of R7.2bn remained well below pre-pandemic levels and fell short last year of what is required to support South Africa’s economic recovery and reindustrialisation.
Trade, Industry and Competition Minister Ebrahim Patel decried the disbursements remaining below an official target of R20bn in order to make a “meaningful impact on the economy.
“It's precisely at the time when traction decreases in the economy that we need to see the impact of an institution like the IDC,” he said.
BUSINESS REPORT