South Africa’s Industrial Development Corp. plans to retain its stakes in Sasol Ltd. (SOL) and Kumba Iron Ore Ltd. (KIO), while divesting from a number of other companies over the next five years.
The IDC, a state-owned lender, has about 50 billion-rand ($6.4 billion) worth of publically traded shares and more than 30 billion rand invested in unlisted stocks in about 250 companies, Gert Gouws, the chief financial officer, told reporters in Cape Town late yesterday. It owns about 13 percent of iron-ore producer Kumba and almost 8 percent of Sasol, the world’s largest producer of motor fuel from coal.
“The divestments from mature investments is very much part of the IDC’s business model,” Gouws said. “Some of our investments would be classified as strategic. We are certainly not considering divestment from Kumba and Sasol.”
South Africa’s government wants to create 5 million jobs by 2020 and has directed the IDC to invest more in projects with potential to cut an unemployment rate of 23.9 percent. Economic Development Minister Ebrahim Patel said last year the Johannesburg-based IDC will invest 102 billion rand in projects over a five-year period.
The IDC plans to raise about 30 billion rand through bond sales and loans from banks and other development finance institutions to bolster its lending capacity, Gouws said.
“The IDC’s balance sheet is significantly under-geared,” he said. “Currently our debt-to-equity ratio is approximately 12 percent. We expect over the next five years to increase our borrowings very significantly to manage that debt-to-equity ratio to close to 30 percent, or possibly even a bit more.”
Funding approvals rose to 13.5 billion rand over the past 12 months, up from 8.7 billion rand the year before, with the IDC on track to meet its lending target, Patel told lawmakers in Cape Town today. The IDC’s loans enabled Ford Motor Co. (F) to invest 3.4 billion rand in its South African plant and supported Bell Equipment Ltd. (BEL) through a downturn, he said.
The IDC will sell a 14-year, 5-billion-rand “green bond” to the Public Investment Corp., the state pension fund manager, with the proceeds used to fund alternative energy projects. The lender will also issue a 2 billion rand bond to the Unemployment Insurance Fund this year to raise financing for job-creation projects, he said. The UIF previously bought a 2 billion rand “jobs bond” from the IDC in 2010.