Non Sovereign Guar. Line of Credit to IDC
- Reference: P-ZA-HAA-006
- Approval date: 05/11/2004
- Start date: 11/03/2005
- Appraisal Date: 31/08/2003
- Status: OngoingOnGo
- Implementing Agency: IDC -Borrower for Private Sector
- Location: JOHANNESBURG - SOUTH AFRICA
The project involves the extension of a long term Line of Credit (LOC) of ZAR 357.5 million to IDC. IDC would on-lend the funds to its corporate clients and SMEs in South Africa and the Southern African sub-region. About 40% of the LOC would be used to finance cross-border industrial development projects in such sectors as manufacturing, construction, agro-business, transport, and communication, electricity, gas, water and SMEs, principally in the automotive services sector, leasing, insurance, tourism, hotels and restaurants etc. Some of the beneficiaries would be well established, enterprises with significant minority ownership by historically disadvantaged persons (HDPs). Part of the LOC would also be utilized for the expansion of the operations of existing enterprises and for acquisition of shareholdings in existing enterprises, as well as enterprises scheduled for privatization over the plan period of 2004 to 2007. ..
The project involves the extension of a long term Line of Credit (LOC) of US$ 50 million later converted to ZAR 357.5 million to IDC. IDC would on-lend the funds to its corporate clients and SMEs in South Africa and Southern African sub-region. About 40% of the LOC would be used to finance local industrial developement projects in such sectors as mining and extractive industries, manufacturing, construction, agro-business, transport, and communication, electricity, gas, water and SMEs, the automotive services sector, leasing, insurance, tourism, hotels and restaurants. Some of the beneficiaries would be well established enterprises with significant minority ownership by historically disadvantaged persons (HDPs). Part of the LOC would be utilizaed for the expansion of the operations of the existing companies.
By providing IDC with a commercially and competitively priced LOC, the Bank is playing a catalytic role, which will encourage, as well as provide a window of opportunity to, other public sector fina ncial institutions and private sector banks in the sub-region to access hard currency loans at affordable costs. Also by endorsing the creditworthiness of IDC, the Bank is playing a catalytic role in strengthening IDC's capability to raise capital from the international capital markets at competitive rates, as well as fostering and encouraging the orderly and efficient development of the capital market, regional financial integration, and vibrant private sector, in the su b-region in particular, and throughout the Continent in general.
(c)Development Impact: Empowerment of the Historically Disadvantaged People (HDP) and private sector development ranks high among the socio-economic development priorities of the South African Government and other governments in the SADC sub-region. The LOC will enable IDC to increase its development role and impact in South Africa and the SADC sub-region. The sub-projects that will benefit from the facilities are mostly export-oriented; they will contribute towards raising the rate of GDP growth, reduce the rate of unemployment, and increase exports. The loan will also facilitate the rehabilitation and expansion of the production facilities of recently privatised public companies. It would also enable HDP to finance acquisition of stakes in existing enterprises as well as establ ish new ones.
(d) Impact on Poverty: The impact of the LOC in reducing poverty in the sub-region is expected to be direct. An estimated 60% of the facility would be used by IDC to provide financial support to its corporate clients and SMEs with substantial minority participation by the HDP, most of who are from the po orest municipalities of South Africa and the SADC sub-region. As mentioned earlier, the enterprises benefiting from the facility would create an estimated 2,000 employment in both rural and urban areas. The sub-projects will also contribute in reducing poverty in rural areas through utilisation of local raw materials, especially those in the mining, forestry, agro-processing and construction industries. IDC would ensure through its environmental monitoring and compliance activities that environmental best practices are strictly observed by the enterprises benefiting from the facility. ..
Economic benefits likely to accrue from the sub-projects to be financed by the IDC include but are not limited to: (a) An estimated 2,000 new employment in the construction, manufacturing, transportation, mining and agro/food processing industries; (b) Job opportunities in the associated informal sectors in both rural and urban areas in the sub-region; (c) An estimated ZAR 630 million in foreign exchange earnings by export oriented enterprises and savings from import substitution enterprises; and (d) Transfer of technology, development of local entrepreneurship and technical skills. It is also expected that some of the sub-projects, for example, those in the agro/f ood-processing, manufacturing and construction industries, will make use of local raw materials produced in the rural areas and in the process, contribute to the alleviation of poverty in the sub -region; These sub-projects will contribute to the estimated R490million or US$69million in revenues in the form of value-added tax, income and corporation tax for the governments in the sub-region as indicated in the financial projection. ..
ANSAH Dennis - OPSD4