Qhena’s IDC has plans to curb unemployment

apoleon Bonaparte might have been impressed by Geoffrey Qhena. The great emperor of the French and military genius once said: “A leader is a dealer in hope.”

And that is exactly what Qhena, and the Industrial Development Corporation (IDC) of which he is the chief executive officer, are doing: offering hope to countless South Africans involved in a battle for economic survival in the aftermath of a crippling global economic recession that left 26% of the population without a job.

The IDC has promised a proactive approach to identify job-creating investment opportunity as it plans to invest R100 billion in the next five years.

Qhena told Leadership that he hopes this investment will potentially create close to 250 000 to 300 000 direct and indirect jobs to accelerate economic growth in South Africa.

During the past 18 months, the IDC invested R1.4bn to bail out 88 distressed companies paralysed by the global economic downturn, saving 8 800 jobs.

Remarkably, born and bred in war-torn Soweto during the midsummer of apartheid, Qhena had a personal IDC of sorts, which ‘saved’ him when starvation and despair beckoned.

His curriculum vitae reveals he is a chartered accountant who qualified in 1993, and that he has completed a senior executive programme jointly offered by Harvard University and the University of the Witwatersrand’s Business School, prior to being offered the high-profile job at the IDC in 2005.

But he might not have completed formal schooling if an old woman with an entrepreneurial spirit had not nurtured and cared for him.

“My grandmother, Lucy, sold snoek and sweets and generated enough income and pocket money to send me to school. She was a loving and disciplined person and encouraged me to pursue a career,” says Qhena.

“She did her utmost to ensure there was enough money to invest in an education for me,” he adds.

His first task after inheriting the job of CEO of the IDC in 2005, was to grow the asset base of the company – which currently stands at R88bn.

“With the increased asset base, we are able to do more,” says Qhena.

The IDC, though, has a massive responsibility, with joblessness in South Africa hovering at close to 26% of a population of 48 million.

The state-owned company works with the Department of Economic Development and the Department of Trade and Industry to identify sectors where the largest numbers of employment opportunities per rand invested could be created for the next five years, in order to inject R100bn into growing the economy.

“We have aligned ourselves with the industrial policy action plan driven by the Department of Trade and Industry. We have identified a number of sectors in manufacturing, mining beneficiation and in agro-processing as well as in the green industries in an effort to localise capacity and to create jobs,” says Qhena.

“The key is to create industrial capacity and to develop and expand it.”

The IDC addresses gaps in the economy and invests where the private sector is not willing to become involved due to the risk. The hope is that once the value chain has been established, the private sector will become involved.

Raising R40 billion

By its own reckoning, the IDC will, however, need to raise about R40bn (of the R100bn) in external capital to be able to comply with the five-year plan.

The IDC’s chief financial officer Gert Gouws told the Sunday Times: “The IDC’s gearing is really low at the moment. We have a debt-to-equity ratio of 4%. This represents a strong balance sheet that will allow the company to tap the capital markets for additional funding.

“We’re planning to raise about R40 billion from the capital markets over the five-year period.

“In fact, we have already set up a medium-term bond note on the JSE, which we hope to draw on close to R15 billion over the next few years.

“As a result of our significantly increased borrowings over the medium term, we expect our gearing to deteriorate significantly; however, we believe this will be sustainable,” he concluded.

It will further look at getting additional funding from developmental agencies across the globe, in particular the Chinese industrial banks.

The IDC seeks to learn from international best practices in other countries in order to fulfil its own mission in South Africa

“The key three best practices are Brazil’s BNDES [Brazilian Development Bank], which is central to the development of the Brazilian economy; the Korea Development Bank; and the China Development Bank,” Qhena told Leadership.

He said the “green economy” has emerged as a primary focus for the development finance institution (DFI), owing to its potential to create jobs and lower the carbon intensity of the South African economy. It wishes to invest R11.7bn in these green enterprises.

The IDC is already studying 11 wind-power projects, seven solar ventures (photovoltaic and concentrating solar power), two biomass projects and a hydropower project. (Additional sources: Engineering News, July 2010; Annual report of the IDC, July 2010)

During its financial year ended 31 March 2010, the IDC committed R924 million to the Lake Turkana Wind Power project in Kenya; while another R33m was approved for a feasibility study into a 450-megawatt solar park in the Northern Cape. This park could embrace both solar thermal and photovoltaic projects.

But Qhena stresses that the DFI is adopting a holistic approach to green industries and that it will seek to participate in the development of green infrastructure and the manufacture of green technologies and/or components. (Source: Engineering News, July 2010)

For instance, it is probing the manufacture of solar-industry components, such as the production of polysilicon and photovoltaic cells.

Furthermore, the IDC is funding the continued development of the Joule electric vehicle and has initiated a pre-feasibility study to determine the viability of manufacturing large-cell lithium-ion batteries in South Africa.

Another study is being undertaken into the establishment of a fluorescent light bulb recycling plant, while R16.5m has been approved for a company specialising in the production of organic composted products.

Qhena reports that the IDC is participating in a project to recycle contaminated mine water, or acid mine drainage. (Additional source: Engineering News, 21 July 2010)

Apart from investing up to R11.7bn in green industries, another focus area for the IDC is mining with an investment of R2.4bn (about a quarter of envisaged funding for the IDC’s next financial year) going into a new manganese mine near Hotazel in the Northern Cape.

The mine, with a targeted output of three million tonnes a year, is expected to be operational by the end of 2011.

Another stakeholder in the project is ArcelorMittal.

The difficult economic conditions resulting from the credit crunch saw IDC revenue drop 48% to R7.8bn in the past financial year, while after-tax profits fell 60% to R2.2bn.

Of the R9.4bn in approved funding (compared to 2009’s R10.8bn), R1.4bn was to assist 88 distressed companies, saving 8 800 jobs.

The main sectors assisted were metals fabrication, automotive and clothing and textiles, while significant amounts were approved for companies in the mining and forestry industries.

The IDC assisted the struggling firms upon the request by the government, as South Africa experienced its first recession since 1992. The manufacturing sector was particularly hard hit by the economic downturn.

Qhena says the IDC is poised to play a stronger role in helping the government realign and expand the South African economy by supporting the New Growth Path and the government’s desire to revitalise the manufacturing base.

In certain instances, this could see the IDC take the lead on project origination. This will require deeper resources and increased risk taking. (Additional sources: Engineering News, www.2bbusiness.co.za)

The IDC will continue to play the role of partner, looking to attract and support private sector players. In that regard, even though the IDC may increasingly take the lead on investments to influence supply, activities will continue to be driven by private sector capacity and demand, Qhena said.

Therefore, even though the IDC is committed to leveraging the balance sheet, prudent management of thereof remains vital so that the lender is still able to align demand and capital requirements as projects come on stream, he said. (Additional source: www.2bbusiness.co.za)

Qhena told Leadership the IDC hopes to create 120 000 direct jobs over the next five years through various investment injections. He hopes this will have a “multiplying effect” and that three times that amount of indirect jobs could ultimately be made available along the developmental chain.

He sees his leadership role in inspiring the IDC to become a powerhouse in the South African context.

“As a leader, I have a vision for the future, but I must also be approachable,” said Qhena.

“I like to display passion in what I am doing, while giving people space to express themselves in their work environment.

“I like to surround myself with people who are more knowledgeable than myself, but allow them to express that knowledge and also allow them to disagree with me where it is needed,” he added.

“My own role within the IDC is as a facilitator to create an enabling environment in which people can excel.

“I perceive my role as a leader in guiding the team and in offering to stand as a bridge between the team and the executive. I must also communicate accurately to the team the expectations of government so that we can respond in an appropriate way,” said Qhena.

Qhena is concerned about the current economic growth in South Africa: “We cannot hope to create jobs to halve the poverty in South Africa by 2015 as stated in the government’s developmental goals if we don’t sustain growth of 6% per annum over a period of time.”

An ultra-marathon runner who has completed nine Comrades marathons and five Two Oceans marathons, Qhena does not believe in quitting or in being downcast about the future. “Rather, we have to invest wisely in sectors that would create jobs for the South African community,” he said.

“If I had 10 minutes on national television to address the nation, my message would be: We at the IDC are ready to work for you. But if you have ideas, come and engage with us. We need desperately to reduce joblessness,” Qhena said.

“But the IDC won’t achieve its objectives unless we secure the involvement of other South Africans and fresh ideas and perspectives. We are committed to making a difference.

“We are also committed to the poorest of the poor. For example: The IDC, through the development agency projects, is working in association with municipalities in poorer South African provinces to identify sustainable projects and to develop them. That happens in cases where councils might lack capacity and skills,” he concluded. ▲

Fanie Heyns