First Strut claims another casualty – IDC chief says it lost R123m to the corporate frausters

The Industrial Development Corporation plays a key role in supporting South African manufacturing. It is proud of having created 19 000 new jobs in its most recent financial year to end March. With an asset base of R127bn and annual disbursements of R13bn, it is bound to make some mistakes. But as you’ll read from the transcript of this interview, CEOGeoff Qhena is taking the First Strut losses very personally. The IDC will be involved in the forthcoming 417 Inquiry about the business conman extraordinaire Jeff Wiggill created and ran for a couple decades. That is sure to provide enough information to feed the Press Pack for months. – AH   

To watch my interview with Geoff Qhena on CNBC Power Lunch click here.

Geoff Qhena: IDC CEO bemoans a R123m loss of taxpayer's money to the fraudsters running First Strut
Geoff Qhena: IDC CEO bemoans a R123m loss of taxpayer’s money to the fraudsters running First Strut

ALEC HOGG: Geoff Qhena, Chief Executive of the Industrial Development Corporation of South Africa, joins us as we look at the full year’s results to end March 2013. I suppose the headline number is that you have an approval rate – you need to explain this – of R13bn. Does that mean you loaned out R13bn?

GEOFF QHENA: That means we’ve approved R13bn. That means we’ve committed it for this particular financial year. Now what happens is; some of the investments will draw their money in the year it was approved, and some of it will be in the following years. This is because of the nature of the investments we have. Which is why when you look at the disbursement rate –R16bn, that’s more than what we’ve approved – this is because some them are long-term in their nature.

ALEC HOGG: That can’t be great though, Geoff, if you consider that you’ve already given away R16bn but there’s only R13bn if you like, on the drawing board. Wouldn’t you have liked to have had an approval rate of maybe R25 billion?

GEOFF QHENA: Let me explain. The R13bn is for the particular year which is the 2012/2013 year end that we’ve had. The approval would include some which came from the prior years. Naturally we would have wanted to approve more, because the economy needs a little bit more stimulation. But we know the environment in which we’re operating is a bit of a tricky one. The previous year we approved about R13.5bn and this year we approved R13.1bn. The fact that we’ve maintained it, I think under the circumstances is good but we’re not entirely happy because we could have done more.

ALEC HOGG: You say ‘under the circumstances’. A little earlier we had Stephen Koseff in here. The whole country saw a photograph of him and Cyril Ramaphosa in the Sunday Times. Koseff with a black eye and they’re both with their boxing gloves. It was interesting to hear the context of it which was identical to what was reported in the Sunday Times: concern amongst the business sector that the NDP – our blueprint for the future – might be coming off the rails. What’s your reading?

GEOFF QHENA: Well, from where my standpoint is, we support government. What is important is that government has approved the NDP so that’s in our activities. We align ourselves with it. But we all know that all of it will be implemented in forwarding partnerships, so it’s important that the partnership existes. It’s important that this dialogue is good. Dialogue needs to be there. In this day and age, we need to stimulate our economy and all of us need to have a common purpose. At these levels of unemployment, I don’t think we have the luxury of time, quite honestly.

ALEC HOGG: Stephen was concerned that the labour relations part of the NDP – which is critical for the purpose of the reasons that you’ve just articulated – was the one that was being side-lined.

GEOFF QHENA: I’m not going to speak on behalf of Stephen. I think the point I would make, is you want government. you want labour. you want business, and you want any other partys that will play. I think it’s important that we all rally around ensuring that we stimulate this economy of ours.

ALEC HOGG: How are you doing to make that happen?

GEOFF QHENA: Well, our results are showing that. The approvals we’ve made means we’ve invested. That means we’ve supported business. There’s about 230-odd for this financial year that we’ve approved either through new businesses (52% of it is new businesses) or through expansions as well. So I think this is what we need. We must bring new capacities into this economy. This is what this economy needs in order to create jobs. We do this in partnership because we provide the financing. We provide the environment and business comes up with the ideas. Through that process, hopefully, jobs will be created. If you look at from those approvals, about 19000 new jobs have been created and we have saved about 4000. In the bigger scheme of things, we’ve still not done enough. Because of the direct jobs we’re at least contributing.

ALEC HOGG: There’s a lot of good news and we’ve covered part of that, but there’s also some bad news, though. This first strut which has been a scar on the whole South African economy, R930m that they took from the bond market which has gone phut; you also had an exposure to them.

GEOFF QHENA: Yes, we have but that exposure will not reflect in these numbers because that has happened. Our year ends in March. So we’ve put in about R123m. It is not something that is always nice because businesses are built on trust. You want to, but this is the taxpayer’s money that we’re looking at. Now if we’re coming to people who are out there to deceive you it’s actually painful. It’s hurtful. It’s better to lose money because the business just didn’t work. But it’s worse to lose money when somebody creates some scheme at the back of that.

ALEC HOGG: How did he get through all the barriers?

GEOFF QHENA: It’s been interesting. We’ve done our due diligence, but now when we look back we find that we’ve been misled. I know there will be a 417 enquiry, I think at the latter part of this month it will start. Hopefully there, we can actually see what has happened.

ALEC HOGG: So somebody lies; there’s not a whole lot you can do?

GEOFF QHENA: What I’ve learned, and I’ve been in this business for about eight years now, when somebody’s out to get you or to crook you, they’ll find all sorts of ways. I’m not saying our due diligence processes are fool proof. We try hard, and that’s discouraging, because in this day and age, particularly for our country, we don’t have time for that. We have to support businesses that are sustainable. If I look at one of the programs where people were employed, they don’t have jobs now – a thousand,  so we need to try and focus on the real issues here.

ALEC HOGG: Geoffrey Qhena is the Chief Executive of the Industrial Development Corporation of South Africa. Good to see you as always, Geoff. Thanks for coming through.

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