Introduction
During his New Year address at the end of 2013, His
Excellency the late President of Zambia Mr. Michael
Chilufya Sata announced governments intention to
establish the Industrial Development Corporation
(IDC) highlighting that the IDC would be a tool for
the modernization and diversification of the
economy.
On 23rd January 2014, the IDC was incorporated
under the Companies Act following the allocation of
K20million from the Privatization Fund towards its
implementation. The establishment of the IDC has
been described as a “master plan to stimulate
industrial development and create about a million
jobs in the next five years.”
Introduction
The Industrial Development Corporation (IDC)has
assumed the shares of state-owned companies.
His Excellency, Mr Edgar Chagwa Lungu,
President of the Republic of Zambia has directed
IDC to immediately review and reconstitute all the
Boards of its subsidiary companies to realign them
with the industrialisation and job creation agenda
as set out in the ruling party’s manifesto.
Objectives of IDC
1. To improve and realize value of Government
investments in state-owned enterprises (SOEs)
through improved management and strategic
orientation;
2. To undertake industrialization and diversification
of the economy including rural development through
creation of new industries;
3. To partner with private enterprises with high
growth potential thereby creating opportunities and
capacity development;
Objectives of IDC
4. To mitigate the financial burden of supporting SOEs
away from the treasury through improved viability
and sustainability;
5. To contribute towards accelerating job and wealth
creation, alleviation of poverty among the people and
economic growth by investment in areas and sectors
where the private sector may have challenges;
6. To promote the participation of women and youths
in viable green projects through strategic partnership
and projects.
Note: I do not agree with some of the objectives here
The IDC: Corporate profile
Established in 2014, the IDC should
be a self-financing, state-owned
development finance institution
Should provide financing to
entrepreneurs engaged in
competitive industries
Should follow normal company
policy and procedures in its
operations
Should Pay income tax at corporate
rates and dividends to the
shareholders
Should have Independent Board of
Directors
Should issue reports on a fully
consolidated basis, with its Annual
Report freely available to the public
What the IDC Should be
A National Development Finance Institution set up to
promote
economic
growth
and
industrial
development. Owned by the Zambian government
under the supervision of the newly created Ministry
of National Planning and Development.
What the IDC Vision Should be
To be the primary source of commercially
sustainable industrial development, a smart and
green economy and innovation to benefit both local
and foreign investments.
What the IDC Mission Should be
The mission of the IDC should be to contribute to the
creation of a smart and green Zambia anchored on
balanced, sustainable economic growth.
The IDC should also promote entrepreneurship
through the building of smart competitive industries
and enterprises based on sound business principles
and practices.
IDC Mandate Should be
Improve regional equity, including the development
of Zambia’s rural areas, poorer provinces and
industrialisation in the rest of the country and
ultimately the entire African Continent.
Promote entrepreneurial development and grow the
small and medium enterprise (SME) sector.
Advance environmentally sustainable green growth.
Grow sector
production.
diversity
and
increase
localised
Support the transformation of communities and
development of locally owned
industries and
enterprises.
IDC Potential Sectors
MOJOR SECTORS
Agriculture;
Infrastructure;
Manufacturing;
Tourism.
IDC Potential Sectors
Sub- Sectors
• Agro-processing Industries
• Construction
• Forestry and Wood Products
• Green Industries
• Healthcare
• Information and Communication Technology
• Media and Motion Pictures
• Livestock and Fisheries
• Mining and Minerals Beneficiation
• Strategic High Impact Projects and Logistics
• Textiles and Clothing
• Tourism
• Venture Capital
What IDC should do
The IDC should provide finance for industrial
development projects, play a catalytic role in
promoting partnerships across industries within
and outside our borders, and promote regional
economic growth.
Industrial Development Corporation should help
build the industrial capacity that fuels the
country's economic growth, by funding viable
businesses.
As the government's key partner in revitalising the
economy, the IDC should focus on priority
economic sectors that offer the greatest potential
to unlock job opportunities.
How IDC should do this
Leading the creation of viable new industries;
Proactively identifying and funding high-impact
and labour-intensive projects;
Using the diverse industry expertise to drive
growth in priority sectors; and
Taking up higher-risk funding projects.
How IDC should be smart
Requiring compliance by all the applicants;
Managing the impacts of all projects;
Promoting the responsible use of all resources; and
Encouraging the use of energy-efficient products.
IDC Core Strategies should be
Promote
entrepreneurship
Promote Small and
Medium Business
Enterprise
development
Job Creation
Facilitate CEEC
Regional Development
Africa Development
Encourage Social
Transformation
IDC needs to maintain its balance sheet integrity to
ensure that it can deliver the above on a sustainable
basis.
IDC Financial Instruments should be
• IDC should offer a wide array of
financial instruments, including :
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Equity
Quasi-equity
Commercial debt
Wholesale & bridging finance
Share warehousing
Guarantees
Export/import finance
Short-term trade finance
Wholesale venture capital
• These may be provided singly or in
combination
Flexible Deal Structuring
IDC Financial Instruments should be
Project/business must exhibit economic merit
in terms of profitability & sustainability
Fixed assets & working capital for new start-up
ventures or expansion of existing businesses
K1 million minimum
Owners/shareholders contribution 40% of
funding normally will be a requirement
Equity participation: Considered as an
alternative if loan finance inappropriate;
minority investments; IDC exit within
reasonable period
Some developmental impact such as: value
addition; job creation; export earnings;
expanding industrial base; poverty reduction;
empowerment
Environmental compliance
IDC may require security, the form and nature
relating to clients circumstance
Seek no shareholding control or management
participation
IDC Appraisal Process
Initial Screening
Basic Assessment
Feasibility Completed
Feasibility not fully investigated
Term Sheet
MOU/Co-operation Agreement
Due Diligence
Feasibility Study
Decision-making (Investment Committee)
Legal Agreements
Disbursement
Post-investment Management
Dambisa Moyo
• Chairperson of
the Board
Charles Milupi
• Vice Chairperson
Yussuf Dodia
Mizinga Melu
Prof: Kennedy
Mwenda
Prof: Clive
Chirwa
•CEO
Dr. Lubinda Habazoka
Justina Mutale
Ng’andu Magande
Margaret Mwanakatwe
New National Planning and Development Minister
Prof: Clive
Chirwa
•CEO
Chief Financial
Officer
Head-High Impact
Industries
Head-Agriculture
and Agro Processing
Value Chain
Chie Operations Officer
Head-Livestoke and
Fisheries Value Chain
Head- Tourism Arts and
Culture Value Chain
Head- Secretariat and Legal
Head-Risk and Debt
Management
Head-Corporate Affairs
Head- Technical &Post Investment Advisory
Head- Human Capital and Corporate Strategy
ZAMBIAN ECONOMIC OUTLOOK
•Average annual GDP growth rate of 7% over the period
2008-2013 and 6.5% over the last two years
•A rapid increase in fixed investment to expand the country’s
productive capacity
•Zambia’s general economic stability and sound macroeconomic management widely acknowledged
•Prudent fiscal policy and continued improvements in tax
collections resulted in a substantial decrease in the budget
deficit in recent years(been threatened now)
•Inflation is well under control at an acceptable single digit
level
•Interest rates and lending rates will need to go further down
•Strong inflow of foreign capital into Zambia– reflecting
increased investor confidence
BUSINESS CONFIDENCE
•The Zambian business community remains very
upbeat about the future of the domestic economy
•The positive business sentiment is echoed by the
excellent performance of the Lusaka Stock
Exchange
•The LUSE’s All-share index increased by ?% during
2014
INVESTIMENT ENVIRONMENT CHALLENGES
Exchange rate volatility (negative perceptions)
Relatively high cost of skilled labour (shortage of
specific skills)
High interest rates by financial institutions
Lack of competition in specific sectors of
economic activity where there are high levels of
concentration and significant barriers to entry
Lack of infrastructure in most investment
potential areas
Lack of formal government support to local
investors and entrepreneurs
INDUSTRY
FACTORS DRIVING SECTORAL GROWTH
Agriculture,
forestry and
fishing
Strong demand for agricultural products,
including an increasing demand from
neighbouring countries; reduction in
agricultural subsidies in advanced
economies; conducive and/or normal
weather conditions; increase in real
disposable income and subsequent
consumer spending on fresh agricultural
produce; high and sustained global
demand for agricultural produce.
Mining and
quarrying
International demand for commodities,
especially from China and India; increased
focus on environmentally friendly
automotive components and related
products.
INDUSTRY
FACTORS DRIVING SECTORAL GROWTH
Manufacturing
Robust domestic consumer and investment
demand. Consumer spending should benefit
sectors such as food, beverages and tobacco,
clothing, textiles and footwear, automobiles,
furniture and household appliances.
Rapid investment spending should impact
upon sectors such as iron and steel, metal
products, machinery and equipment,
electrical equipment and machinery as well as
transport equipment.
Other drivers include strong and sustained
global economic growth; sound fiscal and
monetary policies; preferential market access
and free trade agreements to allow ease of
access into global markets; increased global
competitiveness through improved
productivity; and a stable but competitive
currency. (now under threat)
INDUSTRY
FACTORS DRIVING SECTORAL GROWTH
Electricity, gas
and water
Government spending on service provision
for the poor; The FISP; new power plants and
dams; increased urbanization.
Construction
Government’s multi-billion infrastructure
programme; Construction of the roads under
the Link Zambia 8000, The Pave Zambia 2000
and the construction of Universities, hospitals
and health posts as well as setting up of MultiFacility Zones.
Wholesale and
retail trade,
hotels and
restaurants
Increased job creation; higher disposable
income levels; rising foreign tourism;
emerging zambian middle class; growth
supportive fiscal and monetary policies; low
interest rates and high levels of credit
extension.
INDUSTRY
FACTORS DRIVING SECTORAL GROWTH
Transport,
storage and
communicatio
n
Innovative products and services in
telecommunication; under-serviced area
licences; more efficient logistics system
such as an improved rail and road network,
harbour and port facilities.
Finance, real
estate and
business
services
Sound consumption and business
fundamentals; citizen economic
empowerment; increased public sector
activity; demand for residential buildings.
Community,
social and
personal
services
Increased government spending on service
provision for the poor; increased social
responsibility focus by the private sector.
Identified via ...
A number of initiatives….
Accelerated
& Shared
Growth
Initiative
Examples of the most
viable opportunities...
- Infrastructure development
New power stations,
restructuring of rail
infrastructure, development of
dams and water infrastructure
projects & road projects
- Sector investment strategies
Business Process Outsourcing,
tourism, agriculture and agroprocessing, wood, pulp & paper,
chemicals, bio-fuels,
downstream minerals
beneficiation, broad-band ICT
infrastructure
- Skills development
- etc.
Identified via ...
Examples of the most
viable opportunities...
A number of initiatives….
Expanded Public
Infrastructure
Programme
-
Building materials
Construction services
Electrification
Water reticulation
Telecommunications
Transportation
etc.
Activities benefiting from:
Industrial Policy
- Locating in industrial
development zones
- Current investment incentives
(tax holiday, ZDA schemes)
- Promotion of small scale
industries
- Offset programme
Identified via ...
Examples of the most
viable opportunities...
A number of initiatives….
Minerals Beneficiation
Strategy
- Mineral sectors benefiting
Aluminium, magnesium and
titanium light metals, coating
technology, incl. paints and thin
films, platinum beneficiation,
high performance magnesium
alloys, production of titanium
sponge, jewellery manufacturing,
etc
- Industry and enterprise
competitiveness including
technology enhancement, work
reorganisation and research and
development
Privatisation
Programme
- Zamtel
-
Zesco
ZCCM-IH
Zampost
Times of Zambia
etc.
Identified via ...
A number of initiatives….
Capex Programmes
of State-owned
Enterprises
Examples of the most
viable opportunities...
Revival or resuscitation of previously viable
industries:
Forging and casting, boilers, tooling,
several sub-component manufacturers,
railway lines
Expansion and/or improved
competitiveness:
Locomotives (refurbishment/upgrading),
wagons & coaches, railway sleepers,
alloys, transformers, pumps, valves, taps,
cables, overhead transmission lines,
conductors
Partnerships with global suppliers so as to
set-up local subsidiaries to:
• Produce components of turbines
• Assemble turbines
• Produce components of engines (electrical
as well as diesel)
• Produce components of switchgears
• Build locomotives, wagons & coaches
Identified via ...
A number of initiatives….
Examples of the most
viable opportunities...
- 2017 Youth Africa
Championships
Infrastructure upgrades in
meeting the objectives of the
2017 Soccer Youth
Championship, including:
- Stadium upgrades and new
stadiums,
- Airport upgrades,
- Road upgrades
- Accommodation
- etc.
Identified via ...
A number of initiatives….
Examples of the most
viable opportunities...
Transport Services & Logistics
Road freight, commuter bus service,
Rail services, locomotive maintenance
High
Growth
Potential
Industries
Chemicals Industries
Bio-fuels, man-made fibres, tubes and
pipes, composites, soaps and other
cleaning products, plastics for
automotive industry
Wholesale & Retail Trade
Shopping centre development in
townships and rural areas, convenience
stores, franchising investments,
warehousing facilities
Identified via ...
A number of initiatives….
High
Growth
Potential
Industries
Examples of the most
viable opportunities...
- Construction
Construction projects in the road,
health, education and energy
sectors. Power generation projects,
North Western Rails Project, etc.,
building materials (cement plants,
concrete making, concrete recycling
mobile brick plants; construction
services
- Mining and Mineral Beneficiation
Copper Mining Platinum group
metals, iron ore, coal, emerald
cutting and polishing, jewellery
manufacturing
- Waste Management
waste treatment, waste recycling
(paper and board, plastics, metal &
glass)
Identified via ...
A number of initiatives….
Examples of the most
viable opportunities...
- Wood and Paper Industries
forestry products, furniture,
packaging, paper recycling
High
Growth
Potential
Industries
- Services Sectors
Tourism (eco, accommodation,
conference facilities), health and
educational services, information
technology, business process
outsourcing
Identified via ...
A number of initiatives….
Provinciallyled Projects
Examples of the most
viable opportunities...
- Central: logistics, biofuels, knowledge-based
industries
- Lusaka: logistics, commuter passenger
transport
- Eastern: ethanol, agriculture, water,
sanitation, energy
- North Western: rail infrastructure
- Northern: infrastructure development, cultural
and recreational facilities, logistics
- Southern: logistics, bio-diesel, livestock,
infrastructure development, warehousing
facilities
- Luapula: forestry, agriculture, livestock,
infrastructure development
Copperbelt: emerald cutting & polishing,
jewellery manufacturing, iron ore and
manganese mining,
Western: logistics, infrastructure, radio
telescope project
- Muchinga: oil & gas hub, steel beneficiation
cluster, infrastructure development
What the IDC’s approach
to SME development Should
be
SME development: a national priority
There is need for the government to enact a National Small Business
Act that will foster the operations and conduct of SMEs in Zambia.
SMEs play a vital role in stimulating economic development
Higher degree of labour intensiveness
Lower average capital cost than large-sized enterprises
Often use local recycled resources
Provide opportunities for aspiring entrepreneurs ( especially the
unemployed)
Vital role in technical and other innovations
SMEs are viewed as bridging gap between the first and the second
economy
Vital role in technical and other innovations
Challenges
Access to finance
Little or no entrepreneurial experience
Lack of technical and financial skills
Low survival rate of new businesses
Definition
IDC’s focus of the definition should be on small to
medium enterprises (excluding the micro enterprise
segment)
A business should be defined and classified as small
medium enterprise (SME) if it fits any two of the
following criteria:
Less than 100 employees
Less than K5 Million annual turnover
Less than K3 Million total assets value
Various approaches geared towards
developing SMEs:
Franchising (providing finance to franchisor and
franchisee)
Agency Development and Support (serves as a support
and resource facility to fulfill IDC’s developmental role
through the establishment of agencies -particularly in
rural areas)
Risk Capital Facility (targets private SME sector through
CEE)
Special development financing schemes (Pro-SME Jobs
Scheme)
Pro SME Jobs Scheme …
Capital allocation: K800 million.
Key objectives:
To promote employment creation and SME
development by encouraging businesses to embark
on labour intensive start-ups / expansions.
Pricing and individual loan limits:
Interest rate of prime less 5% applicable for the
full period of the loan (max. 7 years). This period
includes any grace period for capital
repayments.
The low interest rate finance will be limited to
K30 million per project.
Pro SME Jobs Scheme (cont) …
Criteria:
• The financing is available for SMEs in all sectors
within the IDC’s development mandate.
• Applicants must be independent companies or
groups complying with at least 2 of the following 3
parameters:
less than 200 employees; or less
than K5 million turnover; or less than K3 million in
total assets at application date or after the 1st
year of full production in the case of start-ups.
• The business must have economic merit, i.e. have
prospects of acceptable profitability, and must
comply with the IDC’s normal funding criteria.
Pro SME Jobs Scheme (cont) …
Criteria (cont.):
• At least 10, direct, permanent new
jobs must be created.
•
The total capital cost of the new or
additional assets (buildings,
machinery and working capital) must
not exceed K170 000 per job
opportunity (calculated at peak
funding requirement). The new or
additional assets are the total assets
involved in the start-up or expansion
– not only the portion to be financed
by IDC.
Generic issues
•
In cases where the results of the financing provided
under the schemes are not in line with the set
objectives, IDC has the right to increase the interest
rate to a “prime based risk adjusted rate”.
•
All the normal IDC fees (including the
breakage/cancellation fee) will be applicable except for
the Pro Franchising and Pro Orchards schemes.
•
The minimum IDC facility is K3 million (except for
franchising).
•
Only direct, permanent new jobs will be taken into
account for the purposes of qualifying for finance, with
the cost per job calculated at peak.
Entrepreneur development assistance will
include:

Providing greater pre-investment support for high
potential / high impact investments
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Closer monitoring of clients
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Providing generic training and systems to support
new entrepreneurs

Encouraging the development of women
entrepreneurs

Encouraging the development of disabled
entrepreneurs
Providing technical support post investment
Focused training to meet needs of specific
entrepreneurs

Job creation is overarching objective
of IDC financing

Increase focus on the development of
entrepreneurs

Intensify balanced development and
spread job creation across regions
(including
rural
areas,
various
provinces, townships)

Emphasis
on
expansionary
CEE
projects

Continue to focus on Government’s
policy objectives

Job creation is overarching objective
of IDC financing

Increase focus on the development of
entrepreneurs

Intensify balanced development and
spread job creation across regions
(including
rural
areas,
various
provinces, townships)

Emphasis
on
expansionary
CEE
projects

Continue to focus on Government’s
policy objectives
Thank You