Equity pain costs IDC portfolio R26bn
July 3, 2009
By Mzwandile Jacks
The Industrial Development Corporation (IDC) had lost R26 billion in the value of the shares it owned in private companies because of the poor performance by equity markets, the financier said yesterday.
Gert Gouws, the chief financial officer, said however that despite this decline, the budgets showed that the IDC remained financially sustainable.
The state-owned finance group said its investments had dropped in value from R72.8bn to R53bn in the past year.
Gouws added that the IDC's listed investments had "suffered pain" in that period.
The IDC has investments in nine listed companies spanning petrochemicals, mining, paper and pulp, and steel: Sasol, Kumba Iron Ore, BHP Billiton, Merafe, Hulett Aluminium, York Timber, Sappi, Arcelor Mittal and Acerinox.
In March 2007, the market value of its listed investments stood at R33.5bn, according to the IDC.
However, in March last year, this value had first surged to R57bn, then sagged to R34.4bn by March this year.
"Last week, the market value of these investments stood at R36 billion. But is still much lower than last year," Gouws said.
"We hope those counters will come back and perform."
Geoffrey Qhena, the chief executive of IDC, said it would unveil black economic empowerment (BEE) partners for its phosphate producer Foskor next week.
"This means we will be left with about 59 percent shareholding in Foskor," Qhena said.
The IDC holds 85 percent of the phosphate producer, which has been described as valuable to the financier.
It is understood that the IDC has considered selling 26 percent of Foskor to the BEE partners since late last year.
Qhena said Foskor could be listed in the "next month or so.
"But we cannot do so at all costs. If the timing is not right, we can always wait a little while," Qhena said.
Gouws said that the IDC expected to increase borrowings from R5.9bn to R25.9bn to finance planned initiatives.
"We are going to approach the European Investment Bank, the (Dutch development bank) FMO and the African Development Bank," he said.
"We will also be returning to the bond market.
"Expect the IDC to issue bonds like it did 20 years ago."
Qhena said that though the company had other direct lines of credit, these were not enough. "That is why we are going to the bond market."
He told Business Report that the board of the IDC had looked at textile and clothing group Seardel's troubled Frame vertical pipeline, which had asked for financial help.
Qhena said the IDC had set aside R6.1bn to assist distressed companies through the global financial crisis. He said R300 million had already been approved to help these firms, and 14 companies had been assisted so far.
"I will not name these companies because this could cause some panic," Qhena said.
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