Development finance institution, the Industrial Development Corporation (IDC) has approved R746-million and disbursed R440.8-million as part of government’s Covid-19 economic relief measures.
Following the onset of Covid-19 in South Africa, the IDC established three interventions in March.
Each intervention was designed to address specific businesses needs, helping mitigate the impact and spread of the pandemic, as well as helping businesses with much-needed working capital as liquidity challenges increased emanating from an enforced economic lockdown.
The funds include the Covid-19 Essential Supplies Fund, the Distress Fund and Small Industrial Finance Distress Fund.
Further, the IDC also played a significant role in social relief through donations to humanitarian programmes, the institute notes.
“Our specific interventions are informed by our mandate to play a countercyclical role in times of a crisis such as this one, as well as our understanding of the impact of the pandemic to the economy, our clients and the IDC itself,” says IDC CEO TP Nchocho.
The R800-million Covid-19 Essential Supplies Fund was structured to provide funding to companies that manufacture or would import essential products on an urgent basis to combat the Covid-19 pandemic.
This R800-million package is made up of a R300-million Manufacturing Competitiveness Enhancement Programme facility provided by the Department of Trade, Industry and Competition (limited to locally manufactured products) and R500-million of the IDC’s funds ring-fenced for this purpose.
An amount of R536-million (67% of allocation) has since been approved to 15 companies, of which R431-million has been disbursed. Funding approved to date has supported companies producing sanitisers, disinfectants, tissue products, rapid test kits, surgical masks and packaging for medical products, besides others.
“Traction from the Distress Fund was originally flat owing largely to the effect of the lockdown on clients, the appetite to further extend themselves financially and the lending criteria that we adopted. We received many applications, but most of them did not meet our criteria.
"We have observed a rising increase in the number of distressed companies in need of support and in response we have now expanded our qualifying criteria with regard to the Distress Fund,” says Nchocho.
He adds that the organisation will also be expediting disbursement of these funds to qualifying clients.
The result is that the Distress Fund has now approved R160-million to four clients and currently has a pipeline of transactions worth R180-million. Approvals have supported companies in the textiles, aerospace and machinery and equipment industries.
Nchocho is emphatic on the IDC’s countercyclical role, adding that the corporation has, in the past, demonstrated its ability to rise to such a challenge. At the height of the global economic meltdown in 2009, the corporation ramped up its capital injection into the economy from R8.5-billion in the preceding year to R10.8-billion.
In all, R6.1-billion went towards assisting distressed companies over the years immediately after the economic meltdown.
“The challenge we face now is much bigger than the 2009 financial crises hence the need for an agile response by both the private and public sectors to help offset both the short-term and long-term effects of this pandemic,” Nchocho says.
The Social Relief Contribution is a mix of the IDC’s contribution to the Solidarity Fund, of R4.8-million, and R5-million donated to Gift of the Givers. The IDC staff played their part as they rose to the occasion and contributed R282 000 towards the Solidarity Fund.