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Wednesday, September 15, 2010

IDC may issue bonds to boost equity finance

Great news for South African entrepreneurs and new businesses with business plans waiting to be financed, is the information coming through today that South Africa's Industrial Development Corporation (IDC) may issue bonds and dispose of 26 billion rand worth of its stake in listed firms to raise money for new investments, its CEO said on Tuesday.
With regular banks in the country still not lending at the level required to stimulate the small business sector and especially new businesses starting up, the government wants to support the growth amongst entrepreneur with a much needed cash injection.
The state-owned development finance institution has been tasked by government to invest in the private sector to support economic growth and stem job losses after last year's recession.
The IDC lends to medium-sized businesses at more favourable rates and terms than commercial banks.
In a presentation to lawmakers in parliament, chief executive Geoffrey Qhena said the company needed 9 billion rand capital injection by 2015 to keep its equity/debt ratio below 60 percent and it would consider new sources of funding such as bond issuances.
"IDC's ability to attract other investors to projects and thus leverage more private sector investments could reduce its funding needs," he said.
"In the base case, IDC would need to raise 53 billion rand of borrowings (64 billion rand in the high road scenario)," he said, adding the company would dispose of 26 billion rand worth of shares it owned in listed companies.
The IDC who last year approved 1.4 billion rand in loans to companies distressed by a global and local recession has targeted the bio-fuels, automotive and energy sectors for investment and set aside 3.2 billion rand for 2011 to help companies hit by a recession.
Last year it approved 1.4 billion rand in loans to companies distressed by a global and local recession.
Source: Thomson Reuters