IDC in the market for $100 million

IDC in the market for $100 million
Published: 17 August 2017
The Industrial Development Corporation of Zimbabwe is looking at raising $100 million seed capital to kick-start its development financing operations.

IDC is currently in advanced talks with the Industrial Development Corporation of South Africa for a $20 million credit line but there are also indications that the Reserve Bank of Zimbabwe is coming up with a facility to fund this new initiative.

The negotiations with IDC SA come after IDC Zimbabwe finished the repayment of a six year $15 million loan facility unveiled by the South African finance institution that went towards its recapitalization programme.

Well-placed sources told The Herald Business that the $100 million will enable IDC to fully execute its new role as a development finance institution. Part of IDC Zim's strategy going forward will also see the state investment vehicle diluting its shareholding, a situation which will provide the company with an exit mechanism.

"IDC has been the largest shareholder in most companies under its portfolio. However, under the new arrangement IDC will have to dilute some of its shareholding especially in Chemplex Corporation.

"The idea is to make sure we are left with a shareholding that will not involve the day-to-day running of the companies while we execute our new role as a development finance institution," said inside sources.

IDC Zimbabwe's mandate has been to drive industrialisation but in the past the state investment vehicle diverted and started to run companies which it owns. Following a Cabinet resolution that IDC should start providing development finance to the industry, the Corporation decided to approach IDC South Africa for $20 million to kick-start this role.

Cabinet has since approved proposals by the Ministry of Industry and Commerce for IDC to become an industrial financing entity.

Under this new role, IDC will extend financial assistance to start-ups, critical areas identified by Government (leather and leather products, steel and steel products, pharmaceuticals, food processing, alternative use of tobacco, fertiliser production) and firms supported by measures to ramp up production. Industry and Commerce Minister Mike Bimha last week told bakers that the transformation of IDC is going to play a huge role in addressing the financing gap in the industry.

"We have reached a position as Government where we think IDC has to play its role as a development finance institution. In agriculture we have Agribank and infrastructure is anchored by the Infrastructure Development Bank of Zimbabwe.

"Therefore we need to come with our own institution to anchor industrial development through providing finance for our local manufacturing businesses. The RBZ is also in the process of trying to avail further funding to this cause," said Minister Bimha.

Minister Bimha said the intention is to provide source of funding for companies operating in critical areas to continue producing, support small to medium enterprises graduating to being large scale companies and help companies cushioned by measures such as Statutory Instrument 64 to retool and acquire new technology. Last year, the Office of Foreign Assets (OFAC) of the United States Department of Treasury removed IDC from the list of sanctions.

This move, however, has boosted the corporation's prospects of executing its mandate as a development finance provider.

IDC Zimbabwe is mandated to establish and conduct any industrial undertaking, to facilitate, promote, guide and assist the financing of new industrial undertaking industries (including small and medium-scale), schemes for the expansion, better organisation and modernisation of and more efficient carrying out of operations in existing industries and industrial undertakings.
- zimpapers
Tags: IDC,

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