OBG talks Geoffrey Qhena, CEO, Industrial Development Corporation (IDC)

Geoffrey Qhena, CEO, Industrial Development Corporation (IDC)

Interview: Geoffrey Qhena

What opportunities exist in the African market and where do you see the potential for growth?

GEOFFREY QHENA: If you look at the effort that the South African government puts into peacekeeping and conflict mediation on the continent, the more stable and democratic the continent becomes and the more opportunities there are for the IDC to invest in these newly stabilised markets. Africa provides huge growth opportunities. Given all the available resources and the potential of South Africa to add value to these products, intra-continental trade levels are much lower than they should be.

As a corporation, we are looking to continue and increase our project involvement throughout the continent. Additionally, we are looking increasingly at the linkage between these projects and job creation for South Africa. Because of proximity, investments are naturally more concentrated in the South African Development Community (SADC) region as this offers better chances for local product procurement. As our economy is facing saturation in some areas, we also want to help South African service companies find other markets for work. We are particularly keen on infrastructure projects, as local companies secure contracts. The expansion of rail, road, power and telecoms infrastructure in neighbouring countries also unlocks trade barriers and promotes greater economic activity.

What are the prospects for green industry?

QHENA: Were it not for the global recession that started in 2008, slowing down our pace of economic growth, the country would be now experiencing major electricity outages. To generate the 6% growth that we as a country are aiming for, we will need extra electricity capacity. South Africa has historically been reliant on coal, as this has been the best available resource we have. However, the government has made the commitment that as we grow, we should keep in mind the minimisation of the damage to the environment by increasing the generation of new electricity through means other than coal, such as wind, solar and renewables.

As we do not want to create an industry for which we are fully dependent on imports, we want to manufacture the required components locally to the greatest extent possible. If you look for example at solar farms, these on their own create very few jobs, whereas the manufacture of the solar components for the farms creates thousands. Local manufacturing must be viable and though we are willing to pay some premium for local content, it cannot be paralysing and economically irrational. Green industry is a benefit for the country on all fronts as technology is transferred, jobs are created, and the environment is better off for it.

How can the level of investment in undertargeted, less wealthy provinces be increased?

QHENA: When you look at South Africa’s nine provinces, only the “golden triangle” of Gauteng, Kwazulu Natal, and the Western Cape has historically benefitted from major investment projects. So we are trying to be conscious to see what it is that we can do to support the other six provinces. We are today, for instance, building a manganese smelter in the Eastern Cape that should create other offshoot industries. A couple of mines are coming on-line in the Northern Cape and the economic activity they have spurred is amazing. It will be key, moving forward, to make sure that economic activity is sustained. In other areas in the country where mines have sprung up in the past, once the mines were closed, the surrounding areas suffered.

While each province is under pressure to attract high-profile investments such as automotives, not all provinces can be the base for everything and you have to assess what will work for each particular province. For instance, agriculture makes sense in provinces offering rural settings and fertile lands, while solar industry makes sense in places with plentiful sunshine. While our investments will be biased toward creating economic activity in the poorer provinces, we also must be realistic about the provinces’ capacity in terms of a skilled workforce and the support infrastructure required.

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Geoffrey Qhena

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The Report: South Africa 2012

Industry chapter from The Report: South Africa 2012

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