a) The IDC publishes details of its impairments and write-offs in its Annual Reports, details of which are contained on page 76 of the 2017/18 Annual Report. For ease of reference, the information is set out below:
2017/18 |
2016/17 |
2015/16 |
2014/15 |
2013/14 |
|||||
Write-offs per annum (net of recoveries) R’million |
3 025 |
1 329 |
2 045 |
1 363 |
520 |
The IDC Board sets an impairment threshold of a maximum of 20% of the value (at cost) of the IDC’s investment portfolio. As of the last financial year, impairments equaled 17,4% of investments measured at cost, following the accounting standard used by the Corporation. However, if measured at market value, impairments equal 10,4% of the current market value of the investment portfolio.
Over the past 5 years, the highest level of impairment at cost was 18,2%, in 2014.
The function of an impairment threshold is to provide the management with the appropriate “risk appetite” that should be followed in approval of projects. :
b) With respect to the loan amount and details of recipients, the IDC has advised that it does not disclose the details thereof as these were approved prior to 1 April 2017, when a client confidentiality policy was in place, regarding the companies with which it transacted. Following review, the IDC changed its policy on client confidentiality effective from 1 April 2017.
The IDC has disclosed in their 2017/18 Annual Report, that the single largest write-off is in respect of SCAW South Africa, a steel and engineering company that the IDC has a majority shareholding in during the period.
I draw attention to the following comment in the IDC’s 2017/18 Annual Report, that provides additional information:
“The IDC mini-group recorded a R2.8 billion profit (after capital profits), the same as the previous year. Net interest, dividend and fee income increased by 35% compared to the previous year. Increases in operating costs were contained at 1.5%. The cost-to income ratio (excluding cash resource income, impairments costs, and income from mature listed investments) improved to 39% from 46% in 2017.
Of concern is impairments and write-offs which more than doubled from the previous year. This increase was impacted by Scaw where the introduction of strategic equity partners resulted in a significant write-off (R1.6 billion) and a R1.8 billion impairment of Foskor facilities. Higher levels of impairments resulted in the ratio for impairments as a percentage of the portfolio at cost increasing to 17.4% from 16.7% in the previous year. The interventions currently underway at these two subsidiaries, which both recorded losses higher than expected, as well as the establishment of a dedicated department to monitor and manage subsidiaries and other material investments is expected to address this issue.”
Source: IDC Annual Report, 2017/18
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