Date post: | 19-May-2015 |
Category: |
Investor Relations |
Upload: | emrc |
View: | 1,991 times |
Download: | 0 times |
The Role of the Private Sector in Stimulating Agribusiness - Public Private Partnerships
Rian Coetzee
Head: Agro-Industries
17 October 2011
2
IDC - Corporate profile
• Established: October 1940
• Corporate type: Development finance institution, mandated by Act
• Shareholding: Government of South Africa = 100% shareholder
• Reporting: SA Ministry of Economic Development
• Funding: 100% self-financing
• Objective: Support industrial capacity development
• Activities: Provide risk capital (industrial finance or project finance)
• Regional mandate: South Africa & the rest of Africa (since 1998)
• Financial base: Total equity = ZAR 93 bn;
profit = R2,7bn
Debt/Equity ratio = 7%
• Funding: R8,4bn funding to SA companies
• Governance: Follows normal company policy and procedures
• Values: Partnerships, Professionalism & Passion
IDC Head Office, Sandton, SA
3
• Agro-Industries
• Mining & Beneficiation
• Chemicals & Allied Industries
• Metals, Transport & Machinery Products
• Textiles & Clothing
• Wood, Paper & Other
• Tourism
• Media & Motion Pictures
• Techno Industries
• Healthcare
• Strategic High Impact Projects
• Venture Capital
• Equity
• Mezzanine debt
• Commercial debt
• Guarantees
• Trade finance
• Wholesale & bridging finance
• Share warehousing
• Special funding schemes
• Business support products
• Project feasibility funding
• Venture Capital
Sector specialization through
Strategic Business Units (SBUs) …
… flexible application of a large
variety of financial products
… utilising two
business channels…
• Industrial Finance
• Project development
2. An IDC perspective … operational model
4
2. An IDC perspective … agricultural focus area
The SBU focuses on the following areas:
a) Agro-processing (food and non-food)
• Agro-processing can include on-farm, first-tier processing (such as
packing & sorting)
• It can also include backward integrated agro-processing projects
b) Beverages (alcoholic and non-alcoholic)
c) Aquaculture
5
Importance of PPPs in AGRO-INDUSTRIALISATION
Farmers
Development of new and sustainable farmers & job creation
Market access
Skills
Finance
Raw material
Products for
distribution
into value
chain or retail
Agro-Industry
(processor)
Public sector
Private sector
Commercial sustainability & profit making
6
Importance of PPPs in AGRO-INDUSTRIALISATION
Southern Oil Ltd +/- 200 farms
supplying
canola
Establishment of the canola industry in the Western Cape
Market access
Skills
Finance
Raw material Canola oil
products
Public sector
Private sector
7
Requirements for successful DFI role …
• An IDC perspective …
• Element 1: The development of an industry-wide strategy
• Element 2: Non-financial support
• Element 3: Financial products
• Element 4: Front-end customer experience
8
Element 1: The development of an industry-wide strategy
Demand-side
• International demand
• Local food demand
• Other niche areas
Supply-side
• Value addition
• Improved
competitiveness
• Import replacement
• Unique SA products
Agro-
Industrialisation
Drivers
Global expansion
Horticultural value
addition
Grain surplus value
addition
Malt production
Aquaculture
Seed oil & cake
IDC Focus areas
Farmer linkage
9
Element 2: Non-financial support
• Pro-active & reactive policy advice/support
• Project bankability support –
• Local Economic Development Agency Support
• Support during project feasibility stages
• Business support (matching) grants
• Socio-economic advice to broad-based groupings
• External entrepreneurial training
• Support to & partnerships with other DFI’s
10
Element 3: Financial products … Funding
• IDC standard sources of funding:
• Borrowings
• Internal profitability
• Exits from mature investments
• Portfolio approach (across sectors and asset classes)
• Innovative alternative funding sources:
• EU/EIB Risk Capital Facility
• Food sector Competition Tribunal penalties
• Unemployment Insurance Fund
• Segmenting IDC’s portfolio - customised funding
schemes as an enabler for development
Agriculture, forestry and
food4%
Mining29%
Chemicals and petroleum
25%
Metals and machinery
21%
Other manufacturing
3%
Trade, catering and
accommoda-tion3%
Transport, communica-
tion and utilities7%
Finance and insurance
2%
Other6%
IDC’s portfolio
as at 31 December 2010
11
Element 3: Financial products
• Debt products
• Long-term, capital/interest moratoriums, sculpted
repayments
• Mezzanine funding
• Cash flow and not security linked
• Equity instruments
• For own account & share warehousing options
• Bridging finance against contract
• Wholesale finance
• Other products – guarantees, trade finance, etc.
Customised structuring of each transaction
12
Element 3: Financial products … special schemes
• Agro-Processing Linkage (APL) Scheme
• Disaster Relief Scheme
• Pro-Orchards Scheme
• Transformation & Entrepreneurial Scheme (TES)
• Grow E (Employment scheme)
• UIF Scheme
• Distressed funding scheme
13
Element 4: Front-end customer experience
• Importance of first-principle due diligence
• Value adding experience
• Improved customer service
• Decentralised support & basic assessments
• Pre-investment business centre
• Improved turnaround & communication
• Separation of deal-making & post-investment monitoring
• Improved efficiencies (EYHETU)
• Value driven approach (“I make it happen”)
• Innovation
• Knowledge management
14
Agricultural portfolio, include South Africa
- 100 200 300 400 500 600 700 800
Fishing
Processing - Meat
Processing - confectionary
Beverages - alcoholic
Flowers
Biotech
Other
Fruit - Apples
Processing - vegetable
Beverages - juice
Fruit - Persimmon
Dairy products
Processing - fish
Processing - Nuts
Aquaculture
Processing - other
Fruit - Various
Beverage - Juice
Starch products
Fruit - Stone
Fruit - Berries
Fibre
Tea products
Fruit - Subtropical
Processing - Fruit
Agribusiness - wholesale
Fruit - Grapes
Meat - poultry
Nuts
Fruit - Citrus
Sugar products
Total exposure & commitments = R4,5bn
15
Existing portfolio – South Africa
22%
37%
8%
9%
5%
8%
1%
7%
3%
• Wine
• Citrus
• Flowers (proteas)
• Persimmon
• Berries
• Stone fruit
• Fishing
• Processing – fish
• Grapes
• Aquaculture (abalone)
• Pastas
• Fruit packing
• Dried fruit products
• Ostrcih processing
• Fruit – Grapes
• Fibre - Cotton
• Fruit - Citrus
• Processing - Meat
• Processing -
raisons
• Fruit – Citrus
• Pecan nuts
• Malt processing
• Processing - Fruit
• Fruit – Citrus
• Fruit – Berries
• Aquaculture (cob)
• Dairy products
• Fruit - Stone
• Agribusiness -
wholesale
• Agri-services
• Meat processing -
poultry
• Groundnut processing
• Walnuts
• Fruit - Stone
• Meat - poultry
• Fruit - Apples
• Fibre - Kenaf
• Fruit – Berries
• Beverages - juice
• Nuts
• Fruit - Various
• Fruit - Citrus
• Beverage - Juice
• Processing - Peppers
• Processing – dried mango
• Fruit - Subtropical
• Processing - Macadamia
• Fruit – Various
• Processing – Achar
• Processing - Nuts
• Biotech
• Processing - confectionary
• Processing - diversified
• Dairy products
• Flowers
• Beverage - Juice
• Sweets
16
Existing portfolio – Africa, excl. South Africa
Africa, excl. RSA - 32% of total exposure
Sugar - Mozambique
Tea & Macadamia nuts - Malawi
Table grapes - Namibia
Sugar - Kenya
Sugar - Tanzania
Sub-tropical fruit - Mozambique
Cassava starch - Swaziland
Fruit juice – Ethiopia
Poultry processing - Namibia
Case studies
Grain Field Chickens
Description –GFC will be a new sizable BBBEE
chicken abattoir in Reitz in the Free State. With a first
phase capacity of slaughtering 160 000 chickens per
day, it will be the fifth largest in the country;
IDC investment – R85m in debt and equity facilities
IDC role – Debt and equity through share warehousing
for workers trust
Development outcomes – employment at end of 1st
phase = 780 people directly; Through the project, c.a.
80 000 tons of maize will be beneficiated annually and
imports of frozen chickens will be replaced.
Workers’
Trust
Peppadew International
Description –Peppadew is a unique SA brand basedin
Tzaneen in Limpopo Province. Sales did not materialise
due to the financial crisis, which led to large stock write-
offs.
IDC investment – R25m
IDC role – funding to support the company badly
affected by the global financial downturn
Development outcomes – thousand of jos have been
protected, due to the contract farming arrangement of
the company
Industrial Development Corporation
19 Fredman Drive, Sandown
PO Box 784055, Sandton, 2146
South Africa
Telephone (011) 269 3000
Facsimile (011) 269 2116
E-mail [email protected]
Thank you