IDC's role in countering effects of economic crisis

The recession has impacted businesses across the globe, and South Africans were not spared this fate. In 2008 the IDC established a R6.1 billion fund to assist companies that were impacted negatively by the recession.

IDC role:
As a result of the recession, different sectors experienced lower demand for their goods and services, which resulted in cash flow pressures. This was further compounded by the traditional lenders tightening their credit criteria.

The IDC aims to address this by ensuring that jobs are retained and capacity created.

Approximately R1.4 billion was approved to 28 companies in the 2009/10 financial year, providing a much needed lifeline for businesses to implement strategies in order to turn around their operations and be in a better position to successfully emerge from the recession.

Over 8 800 jobs are expected to be created and saved as a result of this intervention. Steps have already been taken to lower the cost of funding to businesses by establishing a partnership with the Unemployment Insurance Fund (UIF) to source funds aimed at creating more jobs.

* To assist companies that were successful before the onset of the economic crisis to withstand the impact of the recession and have the ability to continue growing once economic conditions improve;
* To build capacity and create employment during the challenging phase of the cycle;
* To provide working capital, operational and capital expenses, resulting in competitiveness of the business;
* To ensure liquidity by providing funds that are not accessible from banks; and
* To reduce the quantum of job losses.

The funding can be in the form of debt or equity, structured according to the client's needs. Guarantee facilities are also available. The minimum funding amount is R1 million.

Criteria:
In order to apply for assistance through the Distress Fund, the business would need to supply the following information:

* Latest audited financials (current and at least two years prior to profit deterioration);
* Latest management accounts;
* Updated business plan focusing on the company's turnaround;
* Detailed description of the nature of the investment required, related costs and revenue; and
* Evidence of development impact such as BEE, rural and SME development in addition to job creation and preservation.

In addition to the Distress Fund, IDC's partnership with the Unemployment Insurance Fund has made available a R2 billion unsecured five-year listed private placement bond (fund) geared towards job creation.

The fund is ring-fenced within the IDC and managed by the Risk Capital Facility Strategic Business Unit.

Objectives of the UIF partnership:
* To contribute towards sustainable job creation and retention;
* Through this facility, the IDC will be able to enhance its developmental mandate by passing concessionary funding to job creating transactions; and
* The UIF will in reverse benefit through the reduction of unemployment claims while maintaining continuous monthly contributions.

Funding facilities:
* A maximum of R100 million per transaction for the concessional funding. Additional funding can be made available though IDC's normal funding facilities;
* Only debt instruments will be considered;
* Client is expected to draw-down within seven months after approval; and
* The fund will invest either on a standalone basis or on a co-funding basis with IDC or other financial institutions.

Criteria:
* All eligible IDC transactions in South Africa with a cost per job of up to 450 000 will be eligible;
* Only permanent jobs created/retained in South Africa are taken into account for the above calculation.

For further information, please contact:
* IDC call centre - 086 069 3888
* E-mail: distressfunding@idc.co.za
* Web site: http://www.idc.co.za