IDC CEO Geoffrey Qhena said on Thursday the initiative fully supports the South African government's Accelerated and Shared Growth Strategy aimed at placing the economy on a more rapid and sustained growth trajectory.

Aiming at six percent growth

The government re-emphasised early this year the need to attain substantially higher and sustainable rates of economic growth, at around six percent per annum over the medium- to long-term, in order to halve unemployment by 2014 and visibly reduce poverty across the country.

Substantially higher levels of fixed investment are required to achieve these goals, with the investment-to-GDP ratio having to increase from the current levels of 16.5 percent (2004) to at least 25 percent of GDP.

It is estimated that more than 400 000 new jobs must be created on a yearly basis in order to reduce unemployment by 50 percent over the next ten years. This can only be achieved by raising the economy's labour absorption capacity.

Indeed, South Africa's unemployment challenge can be tackled successfully through increased and sustained private and public sector investment spending.

Labour-intensive ventures

"It is in this context that we encourage companies to invest in labour-intensive ventures or expand their existing operations. We have therefore reviewed our general pricing approach to fund investments with a high developmental impact, focusing particularly on job creation," Qhena said.

"Our Leadership and Development Strategy has identified competitive financing for development as one of the key instruments to enhance investment activity and therefore contribute to elevating South Africa's economic growth rate. Hence, we have designed customised development financing schemes to stimulate private sector investment over the medium-term to long-term," Qhena added.

"In essence, IDC development financing must be aligned with the South African government's six percent Accelerated and Shared Growth strategy, and should reflect both risk and developmental returns. Financing provided to IDC's clients with different risk profiles and development impact must be priced differently."

The new competitive pricing for development has three key objectives, namely:
? To utilise IDC's pricing as a mechanism to contribute towards increased levels of investment activity and place South Africa on a sustainable, higher economic growth path;
? To price more appropriately for risk and development; and
? To address sectoral market failures and gaps,
?To address regional disparities ? poorer provinces and townships.

Five schemes

The IDC Board approved R1-billion for the rollout and implementation of five new development financing schemes.

The R1-billion shall be divided between a SME jobs scheme (R600-million), a franchising scheme aimed at assisting emerging entrepreneurs (R100-million), an orchards scheme (R200-million), a forestry scheme (R100-million), and a BEE expansionary acquisition scheme (no figure stated).

Gerrit van Wyk, Chief Risk Officer said: "The IDC's primary role is to provide risk capital to address market failures.

As"South Africa's leading development finance institution, our role is to maximise the developmental impact of our interventions, while safeguarding the IDC's financial standing. Therefore, we have designed schemes that are ring-fenced, capped at the specified amounts and have a limited duration, that is, December 1, 2006."

"We are committed to assist in addressing our country's socio-economic challenges, more specifically employment creation, poverty alleviation and regional development.

"We are confident that our new competitive financing for development initiative will help us realise this vision", emphasised Qhena.