SA's Industrial Development Corporation (IDC) will invest about R7 billion, or R1.4 billion a year, in the information technology, telecommunications and electronics (ICTE) sector in the next five years, after spending R2.6 billion last year.
While this seems like a cut in funding, CFO Gert Gouws says: “To say that IDC's funding to ICT sectors has dropped when talking about the future is a bit premature.” He says the budget will be reviewed annually and additional funding could be made available if needed for new projects.
Of the corporation's record funding of R10.8 billion approved in the last financial year, a quarter went into the ICT sector both in SA and on the continent. The approved funds were channelled through three IDC units: Techno Industries, public-private partnerships and venture capital, says Gouws.
Last year, two large projects accounted for R2 billion of the budgeted R2.6 billion for the ICTE sector. One of the projects was Neotel's fibre-optic cable initiative, while the other was an investment of R783 million in a telecommunications satellite.
About 20 transactions made up the balance of the funding and, in some cases, committed funds have been disbursed, he says. Of the R70 billion to be invested in the economy by the state lender in the next five years, about 10% will go to ICTE, says Gouws.
He says ICT is a key sector for a growing a sustainable South African and African economy, and is one of the IDC's focus areas. This is why the corporation has set up a specific business unit to focus on the sector - the Techno Industries division.
However, in June, the IDC said it had cut funding for technology companies by almost 50%, as it had been affected by the current economic crunch. Funding for the state agency's Techno Industries division dropped to R269 million for 2009, from R480 million in 2008. The state-owned lender also said, despite declining funding, the demand for lending had increased.
“Funding for smaller companies won't be affected and this doesn't mean we will be funding fewer companies,” said the IDC.
Techno funding
The Techno Industries strategic business unit finances projects and investments in the ICTE industries in SA and the rest of Africa.
It has identified niche areas on which to focus within the sector, including developing sectors such as e-waste and niche products within the electronics sector, facilitating increased small and medium enterprises' entry into the IT sector, especially those with government tenders.
Techno Industries also focuses on developing the business process outsourcing and off-shoring sector, especially to promote the sustainability of smaller companies' participation in the sector.
Approved projects
Projects that were approved for funding by the IDC last year include funding a manufacturer of flat panel television sets in the Eastern Cape, a provider of virtual prepaid services, and a call centre company in Midrand, says Gouws.
The unit also facilitated transformation of the sector by providing finance for empowerment partners to acquire stakes in companies in the sector, he says.
Gouws says the venture capital unit financed a warehouse management system, a superconductor circuit design tool and a remote surveillance system that allows the home or business owner to observe, via cellphone, any area of the home or business at any time.
It also financed a bus management system, which Gouws says is suitable for the South African transport environment as it offers information relating to driver management, such as tracking the speed of the vehicle, travel time and route adherence.
The system also allows vehicle management and tracks aspects such as over-revving, in addition to managing people-related issues, such as tracking ticket sales and overloading.
Overall
The IDC says funding as a whole was up 27%, to R10.8 billion in the year to March, with funding in the rest of Africa up by 38%, to R2.9 billion. The IDC's approved funding activity will facilitate the creation of 24 200 direct jobs in SA. It is not known how many jobs were created in the ICTE sector.
The IDC is a self-financing national development finance institution, which promotes entrepreneurship by financing competitive industries and enterprises based on sound business principles.
Most of the funding, at 52%, was approved for start-ups and expansions; while ownership changes accounted for 15% of loans, and restructuring and rescue absorbed 5%. CEO Geoffrey Qhena says: “The IDC intends to inject more than R70 billion into the economy over the next five years.”
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Big cuts for tech funding
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