IDC funding takes a hit as economy bites

The Industrial Development Corporation (IDC) of South Africa recently released its annual financial results, showing a 14% drop in normalized profits. Tshokolo Nchocho, the CEO of IDC, explained that the decline in profits can be attributed to two main factors, both related to the adoption of a new accounting standard called Efresnai. Despite the drop in profits, the top line revenue of the organization increased marginally by about 2% to 17 billion rand. Nchocho highlighted that the operating costs remained flat, with no significant increase. One of the factors contributing to the decrease in profits is the change in the accounting treatment of equity investments. Under the previous standard, profits generated from the sale of investments were accounted for as part of the gross profit line. However, with the new standard, these profits are now recorded below the line, resulting in a figure of about 2.3 billion rand that was not included in the current year's financials. Additionally, the new standard requires IDC to make provisions for expected credit losses, leading to an additional impairment of approximately 1.3 billion rand. The challenging economic environment in South Africa has also impacted IDC's lending activities. Nchocho acknowledged that the organization has seen a 19% increase in lending to distressed companies, reflecting the tough conditions many businesses are facing. Despite the economic challenges, IDC remains committed to supporting its clients and preserving industrial capacity to save jobs. In response to a question about IDC's role in addressing unemployment, particularly youth unemployment, Nchocho emphasized the organization's focus on development impact outcomes. He noted that 72% of the approved funding for the year went towards new venture creation, growth investments, and business expansion. Furthermore, approximately 3 billion rand was allocated to women-owned businesses, while 800 million rand supported youth-owned enterprises. Nchocho underscored the importance of young people seeking joint ventures and partnerships with established businesses to create opportunities for entrepreneurship. He also highlighted the significance of leveraging enterprise development opportunities within the business ecosystem to enhance success chances for young entrepreneurs. Overall, while facing challenges in profitability and navigating a tough economy, IDC remains dedicated to supporting businesses, particularly those owned by women and youth, and driving development impact in South Africa.