In addition, businesses have had difficulty accessing funding from traditional sources as banks tightened their credit facilities.
The IDC has a long history of stepping up to the plate in hard times and helping companies make it through and this time is no exception. When it became clear that the effects of the global economic slowdown would have a significant impact on local companies, the IDC set up a R6-billion fund to assist companies negatively affected by the recession. The main objective of the intervention is to retain jobs and maintain productive capacity in the economy.
Some R1.4-billion was distributed to 28 companies during the 2009/2010 financial year, providing a much-needed lifeline for these businesses to turn around their operations and improve their position. About 8 800 jobs are expected to be created or saved because of this intervention.
The funds provided help businesses to build capacity and create employment; provide working capital as well as operational and capital expenses, so helping the business to become competitive; ensure liquidity by providing funds not accessible through traditional channels; and reduce the amount of job losses.
To apply for assistance from the Distressed Fund, companies need to provide:
- The latest audited financials (current and at least two years prior to profit deterioration)
- The latest management accounts
- An updated business plan focusing on the company's turnaround
- A detailed description of the nature of the investment required, related costs and revenues, and
- Evidence of development impact (such as black economic empowerment, rural and small or medium enterprise development) in addition to job creation and preservation.
Funding can take the form of debt or equity and is structured to the company's needs. Guarantee facilities are also available. The minimum funding is R1-million.