New innovation unit to kickstart industries

THE Industrial Development Corporation (IDC) plans to assemble an innovation team to identify and support new industries,

with the bulk of its investments into establishing SA's fledgling renewable energy sector already dispursed.

The plans include a possible investment in the Eastern Cape’s sorghum industry as SA gears up to make biofuels from ethanol in the next few years.

The IDC has directed a large portion of its investments to the renewable energy sector in the past three financial years. Of its total funding approvals worth R13.8bn in its year ended March, R5.7bn was spent on "green industries", much of which was invested in projects to develop solar power plants.

CE Geoffrey Qhena said the company planned to put together a "new industries unit", partly as its sizeable renewable energy investments would not be repeated to the same extent as before, the sector now being more established.

While the IDC "will be keen to fund future rounds" of renewable energy projects, it would be likely to target smaller projects with opportunities for transformation.

The IDC was increasing its focus on the manufacturing sector, including on the steel value chain, agroprocessing, textiles and on industries that would support the government’s infrastructure programme — for instance, investing in train-component suppliers.

"This approach of stimulating manufacturing and doing more in industrial infrastructure will require the IDC to come in very early, to take slightly higher risk, and to stay the course," Mr Qhena said on Thursday

Industrial infrastructure referred to the supporting infrastructure needed to "unlock" various projects which would otherwise not be viable. For example, Mr Qhena said the IDC would now fund railway, road or power infrastructure for third parties that wanted to develop a mine, whereas the IDC had typically supported only infrastructure when it was investing itself.

Although the IDC had a "venture capital" team, its mandate was too limited and the "new industries" unit would scout for sectors which could be created by identifying gaps after consulting industries and identifying trends, he said.

This was partially based on the success of its renewable energy investments — which were also supported by major finance institutions — but also on the work of development finance institutions in countries such as South Korea and Brazil. The IDC’s counterparts in these countries had enabled innovation, Mr Qhena said.

Among the IDC’s planned investments is a steel project in partnership with China’s state-owned Hebei Iron and Steel Group.

The venture would stimulate competition in the domestic steel market and allow for the beneficiation of locally sourced minerals such as magnetite. It would look to supply steel into the rest of Africa, as countries invested more in infrastructure, Mr Qhena said.

During a prefeasibility study, the partners would identify a site for the plant, which could at the coast or inland in areas such as Phalaborwa and Middelburg.

Mr Qhena said the IDC’s increased agroprocessing focus could include a bio-ethanol project in Cradock, where the IDC believed it was "close to finalising a partner".

It had initially sought to produce ethanol from sugar cane, but decided "we don’t want to compete with food", as this would inflate prices.