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STATEMENT BY THE RT HON PRIME MINISTER

 

DR B.S.S.DLAMINI

 

AT THE LAUNCH OF THE NATIONAL INDUSTRIAL DEVELOPMENT CORPORATION OF SWAZILAND (NIDCS)

 

AT SIBANE HOTEL

 

THURSDAY 1 AUGUST 2013

 

 

Honourable Ministers

Mr Gerrit von Wyk - Industrial Development Corporation of South Africa

Chairman and Board of NIDCS

Distinguished Guests

Ladies and Gentlemen

The word “revival” is one that is familiar to us all, and that generally has pleasant and invigorating connotations. The launch of the new National Industrial Development Corporation of Swaziland – known best by its acronym, “NIDCS” - is a form of revival and one that should also be viewed in a spirit of encouragement and optimism.

But in the same breath has to be included the word commitment. All those who will be part of NIDCS – its Board, Management and staff and the relevant Government Ministries will need to recognize at the very outset that there must be the fullest commitment to make the new NIDCS the investment vehicle that its predecessor did not turn out to be.

Certainly the playing field of today is very different from when the former NIDCS was, shall we say, a “quasi-active” corporation working for its owners, Government, as the catalyst for industrial development in the Kingdom.

On the positive side we recognize that Government has learned a great deal from past experience and we have a new Investor Roadmap in place, being systematically implemented, that is making our business environment increasingly conducive to private sector growth.

At the same time, we cannot avoid the harsh reality of weak economic growth in our main export markets and the direct impact this is having on our own economic performance. Our industrial base has become somewhat stagnant and undiversified. And, most significantly, not only has sub-Saharan Africa been unable to attract more than a tiny proportion of global foreign direct investment (FDI) but also the competition for FDI in our region has become ever more intense.

Initially, there is of course the housekeeping to sort out in the re-launched NIDCS. The existing enabling legislation will need to be amended to ensure the new Corporation is legally empowered to carry out its enlarged mandate. There will also be the need to complete the resolution of outstanding issues and financial links with the Swaziland Industrial Development Corporation (SIDC) which replaced the former NIDCS and is now pursuing a separate corporate strategy.

There will also be the issue of factory shells to examine critically. Initially, there will be the transfer into NIDCS of the ownership and management responsibility for the Government factory shells currently managed elsewhere in the public sector.

Of significance will be the question as to whether NIDCS, as owner and manager of the existing stock of factory shells, should be investing in new factory shells in the future. Times change. Ten years ago it was essential, from a competitive point of view, to offer ready-made factory shells to investors. But one-size-does-not-fit-all. With differing needs for different investors, and the risk of a short-term vision in the investor who merely rents made-to-measure accommodation that may not suit a new investor at a later time, it is right to consider other options that might be available. But whichever avenue is pursued there will be the need, in the first instance, to rationalize the maintenance and rentals of the existing factory shell holdings.

Imminent at this time is the study of investment incentives that is to be carried out by consultants in the near future. We need to know what we can provide as a country that makes us special and competitive in the eyes of the discerning investor. Meeting all the Investor Roadmap targets will make a huge contribution in that respect, but we also need to ensure that the incentives to new investors will make our country really stand out above the competition, so to speak. That is not limited to fiscal incentives such as reductions in corporate tax or the tax relief provided by mechanisms such as the Development Approval Order. It can involve mobilizing super-incentivised financing packages for owner-occupier factory accommodation that are conspicuous in terms of financial appeal at the same time as making the investor a more permanent part of the domestic economic and social scenery.

The outcome of that study will be valuable to NIDCS as it sets out to deliver on its mandate.

NIDCS will be the holding company for all Government investments in the private sector. Initially, the housekeeping will involve taking into the Company the existing investments owned by Government. NIDCS will start with the investments in which Government has a minority shareholding.

Many such investments are currently classified as “public enterprises” when in reality, given the minority, non-controlling shareholdings that are held, they cannot really be considered as such. Completing the transfer into NIDCS of all Government’s investments will be an early priority, providing the clear advantages from managing and monitoring all such investments under one roof, supported by active Board representation in the respective corporations. Plans for carrying out this exercise are nearing finalization.

Improvements arising from implementation of the Investor Roadmap by existing Government agencies will make a big contribution. But, for some time, there has been a need for a new kid on the block in the form of NIDCS – an agency that will be Government’s investment company, attracting industrial FDI and extracting maximum value from Government’s participation in various ventures. It will be the special purpose vehicle for investing on behalf of Government and ensuring that Government receives the due return on its investments.

Two areas stand out as exciting opportunities for the new NIDCS. In the first instance there is the scope for joint ventures and other forms of equity participation. And, secondly, NIDCS can operate as a development finance institution. This mirrors the mandate of its counterpart in South Africa, the Industrial Development Corporation (IDC), and offers hope to our small, medium and micro-scale enterprise sector in terms of increased availability of affordable finance. We welcome the presence here today of Mr von Wyk from IDC and his participation suggests that a continuing collaboration will be of great benefit to our new NIDCS.

The joint venture and other forms of NIDCS investment in the equity of corporations will represent a partnership that offers many benefits. These include providing access to a wider range of resources such as cash or land, the opportunity to share costs and the risks attached to new investment. In general, this type of joint venturing is seen as low risk by the private sector, being viewed as bringing government gravitas – credibility and influence - to operations. There is also the potential gain from the different expertise that each partner brings to the new corporation.

Completing the recruitment of the planned staffing complement and dealing with the initial housekeeping measures that I have mentioned are an early priority. One must also emphasise the importance of mobilising the necessary capital to ensure that it can take advantage of investment opportunities. The required framework is approaching finalization and must be ready for inclusion in next year’s Budget.

We need also to avoid re-inventing the wheel so to speak. Let us learn from the experience of other countries that have similar investment vehicles, some close to home in South Africa and Botswana, and others further afield in Mauritius and Malaysia. Let us also take on board the details of where those investment vehicles have created subsidiaries whose shares can later be made available for the general public to purchase.

It is also important that NIDCS does not ignore the lessons learned from history and, in particular, the global privatization movement of the past three decades. NIDCS should focus on investing and not operating. It is being launched to attract and facilitate industrial investment and will invest to give foreign and local investors confidence, and Government a healthy dividend, through equity participation.

It is there also to lend in the form of development finance to new business undertakings and the expansion of existing ones. NIDCS may also be called upon to act as implementing agency for public-private-partnership projects, guided by the recently-approved PPP policy and the Public Finance Management Act. The combined strategy will serve to stimulate economic growth and employment creation.

I conclude my remarks today by expressing my very best wishes for the growth of an NIDCS that stands as a model of enterprise, integrity and sound corporate and financial management. It is now my honour, on behalf of His Majesty’s Government, to declare the new National Industrial Development Corporation of Swaziland (NIDCS) officially launched.

Thank you.

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