THE Industrial Development Corporation (IDC), a commercial arm of government, is contemplating changing its business model from a venture capital company to a development financial institution, The Financial Gazette’s Companies & Markets (C&M) has learnt.
Venture capital companies usually get significant control over company decisions in addition to a significant portion of equity in a company.
IDC’s original mandate was to promote the establishment of new industrial enterprises and the rehabilitation of existing ones but the firm had become more of a management services holding entity after the formation of Zimbabwe Development Bank (ZDB) and the Small Enterprise Development Corporation (Sedco) in the 80s.
Michael Ndudzo, IDC’s Group chief executive officer, told C&M last week that the conglomerate was working on a strategy to move away from managing own subsidiaries as is the case at the moment.
“Our strategic shift is to go back to the development finance role and reduce management services role of own subsidiaries we control,” said Ndudzo.
“We thus may retain shares in key large strategic investments but not necessarily running or controlling them anymore. Our experience in running industrial enterprises will thus be used to evaluate feasibility of proposals and mobilise resources to capacitate new upcoming entrepreneurs and formal competitive enterprises in value addition of minerals, agricultural and knowledge industries.”
He said that to execute this strategy, IDC was courting investors to dilute its shareholding in strategic companies they control and completely divest from some of its smaller subsidiaries.
“To do this we have to salvage value from existing investments, by allowing dilution in the major strategic ones so as to rehabilitate their production equipment to globally competitive levels. We also wish to divest in small to medium scale ventures which are mature and running, first to existing partners and to consortium of indigenous investors wherever practicable.
“We would use any such recovered capital, complemented by bonds and long term capital to fund the transformation, so that we become the dynamic driver for industrial development, receiving and evaluating projects from the broad based investing public.
“We would then fund them with appropriate tenure funding of both debt and equity, than a static management services and investment warehouse holding entity we had become, as that is what the economy needs to reverse de-industrialisation of last decade and grow real output, incomes and tax base at a faster pace, empowering and capacitating entrepreneurs in the process and collaborating with research and tertiary institutions,” Ndudzo said.
IDC controls more than 15 companies with interests across different industrial sectors.
It partnered the Japanese in the motor industry (Willowvale Mazda Motor Industries (WMMI), Amtec, Deven, Autologistics), the Italians in granite (Stone Holdings and Zimrock), the Iranians in textiles (Modzone), the South Africans in aluminium extrusions and castings (Almin metal), the Chinese in cement (SZCC), the Malaysians in industrial real estate, Sunway city, the Indians in agro processing (Surface investments) and the French in horticulture (Bonnezim now liquidated).
It also partnered local conglomerates TA Holdings in fertiliser manufacturing (Zimbabwe Fertilizer Company (ZFC) and Sable Chemicals), Treger Group of Companies in Zimbabwe Grain Bag and AICO in food processing concern Olivine Industries.
Last month, Ndudzo told C&M that IDC was courting suitors for US$140 million to recapitalise its ailing subsidiaries, a move which will stimulate production in these subsidiaries.
One of only a few State-owned firms to have consistently declared dividends since independence in 1980, IDC’s fortunes were affected by an unprecedented economic crisis that swept through the country during the decade to 2008, debilitating industry and ravaging the economy, now without a domestic currency and grappling with a liquidity crunch.
Government, the sole shareholder in IDC, has been unable to bail out the investment company with cash to allow it to recapitalise a number of its subsidiaries, with outgoing Finance Minister Tendai Biti having recently ordered IDC executives to approach banks for loans.