Big cuts for tech funding

Johannesburg, 05 Jun 2009

The Industrial Development Corporation (IDC) has cut funding for technology companies by almost 50%, saying it has been affected by the current economic crunch.

Funding for the state agency's Techno Industries division has dropped to R269 million for 2009, from R480 million in 2008. The state-owned lender also says, despite declining funding, the demand for lending has increased.

“Funding for smaller companies won't be affected and this doesn't mean we will be funding fewer companies,” says the IDC.

The IDC is a self-financing national development finance institution, which promotes entrepreneurship by financing competitive industries and enterprises based on sound business principles. Its Techno Industries division makes investments in IT, telecommunications, electronics and electrical services.

In order to deal with the growing demand for funding, the IDC says it has increased requirements for companies looking for funding.

“Our funding requirements have not become stricter. What we require is that technology companies have R1 million of funding from shareholders already available, or have secured contracts to the value of R1 million before we provide funding,” says the IDC.

Sourcing funding

The corporation also states that, due to the economic crisis and the high demand for lending, it will be forced to increasingly source funding from the international market to meet the demand.

The focus will be on diversifying the funding base and enhancing the provision of finance to SMEs, it says.

In March 2009, the IDC received a loan of 60 million euro from the European Investment Bank (EIB). Over the years, the EIB provided four credit lines totalling about 165 million euro to the IDC for local SMEs.

The IDC announced the loan would support viable projects by SMEs in the industrial, resources and services sectors, with the IDC classifying technology as a services industry.

In April 2009, the IDC received a $50 million loan from the China Construction Bank. The commercial loan will assist the IDC to increase its lending capacity in general and also recapitalise its export finance loan book.

The focus will be on projects that exhibit economic merit in terms of profitability and sustainability, which have proven technology, an established and growing customer base, and will impact significantly on the local and international markets, says the IDC.