The Industrial Development Corporation of South Africa (IDC) would like to clarify several inaccuracies published in the article by Isaac Mahlangu and Bobby Jordan, “Millions lost as IDC projects fail”, published on November 5.
The article covered a boutique hotel in Pretoria purchased by Siyanda Dlamini, and a liquefied petroleum gas (LPG) cylinder manufacturing facility in the Coega special economic zone (SEZ) outside Gqeberha, a start-up led by Manana Bogatsu.
The allegations, which questioned the corporation’s due diligence processes, are based on a misrepresentation of facts by entrepreneurs who have failed to honour their debt- service obligations for credit facilities advanced to their businesses by the IDC.
The acquisition of the River Meadow Manor boutique hotel in Pretoria was initiated by Dlamini, who purchased it directly from the seller. The IDC was not party to the negotiations.
Dlamini was granted two loan facilities by the IDC — one to complete his purchase of the hotel, and the second to build a conference facility on the premises. Accordingly, funds were disbursed to enable him to complete the acquisition of the hotel. Despite entering into a flexible loan repayment schedule with the IDC — this after failing to honour his debt-servicing obligations with the IDC — Dlamini has defaulted on this commitment.
The second facility remains undrawn as he has yet to meet the conditions to access the money, among which is the rezoning and compliance to statutory requirements. By his own admission and prior to purchasing the hotel, Dlamini was aware that the lodge was granted special consent to operate within stipulated restrictions and he would therefore have to apply for a rezoning of a portion of the land so he could add a conference facility enabling him to maximise his revenue. This is information he provided to the IDC.
The IDC declined his request to draw the second loan because he has not yet complied with the statutory requirements to build a conference facility. Contrary to his claims, it is the IDC’s due diligence processes that informed this decision. The IDC has a multidisciplinary approach when conducting due diligence. This, coupled with our credit risk management framework, serves as the foundation for the corporation’s ability to offer funding to entrepreneurs.
We wish to state categorically that the IDC would not have provided him with funding if all the necessary conditions were not met. It is also important to state that Dlamini did not disclose to the authors of the article that he is currently trading from these premises and his allegation that this business never got off the ground is inaccurate. He has hosted several high-profile public events, some of which were aired on television.
Contrary to the claim that the IDC was negligent in conducting the due diligence on the transaction, the opposite is true. It is our due diligence processes that revealed his failure to meet conditions precedent to drawing the second credit facility — suffice to add that conditions for the two facilities are unrelated. He therefore remains liable to servicing the loan advanced to acquire the property.
The LPG cylinder manufacturing facility in the Coega SEZ
The other matter, raised in your article titled “Gas plant was just hot air”, relates to what was earmarked to be a flagship gas cylinder manufacturing facility in the Coega SEZ but has since been placed in business rescue.
This project was the brainchild of Bogatsu, who approached the IDC for funding to set up the facility. The IDC provided the requested funding of R170m to Bogatsu after a due diligence conducted by the corporation proved that the project was economically viable.
The IDC raised concerns with the client about how the funds were being utilised in the development of the project. Prior to placing the company into business rescue, the IDC declined to provide further funding to the project, instead advising the client to find a strategic equity partner. Therefore, the allegation made by her legal representatives that the IDC took away her business is factually incorrect.
The IDC has a zero-tolerance approach towards fraud and corruption. Our record on this matter speaks for itself
As things stand, the process of finding a suitable buyer has been ongoing and is being managed by the IDC’s appointed business rescue practitioners (BRPs). Public announcements of any intention to acquire the assets of the business in question outside of the BRP process under way, as per law, cannot be considered by the IDC. Any company interested in acquiring the assets can approach the BRPs directly.
The IDC reaffirms its commitment to funding black industrialists, which is evident in our track record of disbursements. The claim suggesting the IDC’s bias is towards foreign entities and white-owned businesses is completely unfounded and lacks merit.
The IDC remains unwavering in its dedication to financing entrepreneurs with viable business proposals that are in line with its mandate of industrial development, promoting job creation and fostering inclusive participation in the economy. We will continue to do so while adhering to stringent governance processes that comply with all the relevant laws of our country.
Last year alone the IDC approved R7.6bn to black industrialists, R6.5bn to black-empowered and black-owned companies, and R1.1bn to women-owned businesses. Over the last five years, the IDC has approved R9.7bn to women-owned businesses.
While the IDC continues to finance its core activities from its own balance sheet, the South African public can rest assured that the corporation manages these funds with the utmost care and dedication. The IDC has a zero-tolerance approach towards fraud and corruption. Our record on this matter speaks for itself.
• Ramodibe is head of corporate affairs at the IDC
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