[September 06, 2006]

Aid for Africa to bridge growing digital divide

(Business Day (South Africa) Via Thomson Dialog NewsEdge) Aid for Africa to bridge growing digital divide IDC unit fosters growth in IT, reports THE Industrial Development Corporation's Techno-Industries Strategic Business Unit was created to help Africa bridge the digital divide.

Unit head Willie Fourie says it was established in 2000 when the corporation was broadening its developmental reach. Before this the IDC was mainly into manufacturing and some primary sectors of the economy, such as mining and agriculture.

As part of an evolutionary process, the corporation started moving towards services such as tourism, and then created Techno-Industries to foster growth in information technology (IT), telecommunications, electronics and some parts of the electrical subsector.

At the time there was a focus on bridging the digital divide in Africa and forming Techno-Industries was a part of this initiative. He says the unit's goal was to assist in developing home-grown technologies as well as to nurture technology companies providing services in this sector and often adding value to imported technologies. In addition, the IDC wanted to encourage black participation in the sector.

From 2000 until March this year the Techno-Industries unit has approved a total of R718m in 103 different transactions.

We have been involved with about 100 companies, as we have engaged in more than one transaction with some players. The deals for which we have approved funds include black economic empowerment acquisitions and traditional expansionary loan funding.

We have also provided a lot of bridging finance and revolving credit facilities, usually to help companies that have won contracts with large corporations or government entities. He says about two years ago the IDC adopted a strategy of leadership in development focusing mainly on job creation.

Since then our primary focus in any transaction has been job creation. Alongside this priority we have other developmental objectives and initiatives such as development in rural areas, poorer provinces and neglected areas such as townships. At the same time we also look at straightforward empowerment transactions.

Changing ownership in the South African economy and assisting in the process of transformation is an important component of our mandate. He says encouraging expansion and growth is critical in the process of development as they are usually accompanied by job creation.

The Techno-Industries unit has identified several sectors that offer considerable promise for the development of the economy.

The call centre industry, or business process outsourcing and off- shoring, is part of government's accelerated shared growth initiative.

The reason why it has been highlighted is because of its high job creation potential. We have financed about seven smaller call centres and they have all generated significant numbers of jobs. He says the telecommunications industry is another sector in which the unit wished to play an aggressive role in fostering development. The IDC is particularly interested in assisting rural telecommunications projects.

As part of their licence conditions, telecommunications operators are required to meet certain community obligations, and we try to get involved in these projects. He says telecommunications is essential for development, therefore by encouraging telecommunications infrastructure in under-developed areas the IDC is helping to create an environment for further development.

Fourie says government has granted seven under-serviced area licences to emerging telecommunications companies, with another 21 due to be issued, to operate telecommunications services in under-serviced areas.

None of these companies has really got off the ground, as providing commercially viable services in these areas is a challenge. We have examined a couple of these companies so far and they seem to be in a position to make their business models work, and we will seek to get involved in funding when they do. He says another area in which the IDC has a particular interest is in encouraging smaller empowerment companies who have obtained contracts to provide services in sectors such as electrical and telecommunications services.

They win a contract and we provide funding to help them execute the agreement. This helps to facilitate empowerment, and there are often significant spin-offs in the form of job creation, Fourie says.

Copyright 2006 Times Media Ltd.. Source: Financial Times Information Limited - Europe Intelligence Wire.

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