The Industrial Development Corporation (IDC), the mainstay financier of South Africa’s industrial base, is planning to approach the South African Revenue Service (Sars) for tax relief as it faces mounting bad debts affecting its ability to play its developmental role.The 86-year-old entity provides risk financing to entrepreneurs and businesses to promote economic growth, industrial development and job creation across South Africa and the rest of the continent.It is this nature of its business that the IDC wants the tax agency to recognise and hike its doubtful debt allowance — a tax deduction that allows businesses to claim a percentage of their outstanding, unpaid trade debts. The mechanism provides tax relief for uncollected revenue before a debt is officially written off as a complete loss.The IDC has asked consultants to prepare a compelling application to Sars to increase the allowance.In its market sounding document, IDC stresses that it operates primarily under a developmental mandate, providing funding to entrepreneurs and enterprises that are inherently high risk, including businesses with limited collateral and constrained access to conventional finance. “The IDC also has a business rescue-oriented credit culture, prioritising the rehabilitation and sustainability of funded enterprises over premature enforcement or liquidation,” the document reads.“The IDC currently applies a doubtful debt allowance of between 25% to 40% for income tax purposes. Given the nature of its lending portfolio, credit risk profile, historical recovery trends and collateral realisation practices, this allowance is not aligned to the expected credit losses and net realisable value of impaired loans.“The IDC seeks to appoint a suitably qualified service provider to scope, assess and motivate an increase in the doubtful debt allowance up to 85% in line with the Income Tax Act, supported by a robust, defensible submission to [Sars].”The IDC is led by Mmakgoshi Lekhethe, who took the reins of the group in 2024. Her most recent role was deputy director-general responsible for asset and liability management at the Treasury.The onus will now fall on Lekhethe and her team to prove to Sars that the higher allowance is warranted. Sars will assess factors such as the history of nonrepayment, steps taken to enforce collection, recovery likelihood and any available security before arriving at a decision.The IDC’s impairments approached the R30bn mark in the 2025 financial year, with the company contemplating risky investments in Tongaat Hulett and ArcelorMittal South Africa — two organisations to which it has already extended more than R4bn.The entity is also engaged in a high-stakes battle with miner Kalagadi Manganese over a debt that has ballooned to north of R5bn. Besides being a major creditor of Kalagadi, the IDC has a 20% shareholding in the company.Kalagadi mines manganese in the Kalahari basin in the Northern Cape, which is home to about 80% of the world’s known land-based manganese reserves.The mine lies on a stretch of three farms on which it holds new-order mining rights and is believed to overlay more than 960-million tonnes of manganese ore.This is but one example of several investments gone wrong for the IDC, which has several such matters at the litigation phase.The bid by the IDC for tax relief is likely to receive support from the portfolio committee on trade, industry & competition.“In advancing measures aimed at improving the operational environment of the IDC, the committee announced that it will lead a debate in the National Assembly on the possibility of a tax exemption to address what it believes is an anomaly affecting the IDC,” the committee said.“The committee will explore and lead a discussion on the possibility of recapitalising the IDC, including through direct engagement with the [Reserve Bank], to strengthen the IDC’s capacity to support large-scale developmental and industrial initiatives.”The committee is pushing the IDC, known as the lender of last resort, to invest in high-impact national projects such as revitalising refineries that have closed and supporting new entrants into the oil and gas sector, smelters and industrial furnaces to propel industrial development in South Africa.Tshepo Ramodibe, head of corporate affairs at the IDC, said: “We confirm that we are seeking to appoint a consultancy to help prepare a motivation for a tax relief application. However, we are in a closed period and cannot comment further.”The IDC’s profit in the 2024/25 financial year plunged 96% as the impact of a surge in bad debts hurt its bottom line.The tension between developmental objectives and financial sustainability has often come to the fore in the IDC’s business model, with high impairment levels, limited recapitalisation and reliance on capital markets for funding.This has not stopped it from investing billions of rand in the economy and planning a further R100bn outlay in the next five years to expand support for exports and strengthen transformation funding.