ECDC: R75 million to save jobs
The Eastern Cape Development Corporation (ECDC) has reviewed the Eastern Cape Jobs Stimulus Fund to accommodate businesses that are in distress due to the effects of Covid-19 following an announcement by the government that it has set aside an additional R75 million in funding to augment the R17,4 million that was initially allocated to the current Jobs Stimulus Fund.
“Businesses operating in the following targeted sectors will be prioritised for participation: agro-processing and beneficiation, green economy, tourism and hospitality, manufacturing, capital goods producers, and construction. Companies in the services sector may be considered to participate in the programme if the economic and social impact due to prevalent job losses is significant,” said Tandeka Rozani, ECDC’s Head of Development Finance and Business Support.
In its initial form, the ECDC administered Jobs Stimulus Fund only provided a one-off incentive of R10 000 per job saved or retained to qualifying distressed companies.
The company was required to save/retain a minimum of ten jobs.
“The review means that the minimum number of jobs to be saved or retained by a qualifying business as a result of the effects of COVID-19 has since been reduced from 10 to five,” said Rozani.
The Jobs Stimulus Fund will provide special consideration in the form of a three months working capital incentive to businesses that are negatively affected (directly or indirectly) by the coronavirus with effect from April 1, 2020 until March 31, 2021.
The additional incentive will cater for three months working capital for rental, salaries and other key operational expenditures. Companies will be required to provide a detailed cost breakdown and motivation for the working capital over the three-month period.
This additional ‘working capital’ incentive will only apply to business with an annual turnover of R20 million and below.
“Applications from distressed businesses have been approved to the value of R5.81 million which translates to 581 jobs being saved. A large number of applications are currently in the pipeline for consideration as from August 1, 2020 due to high demand for Covid 19 relief support,” says Rozani.
In order to qualify, the following will be highly considered; companies with 100% South African shareholding; employees must be permanent or with a two-year fixed-term contract; companies must be compliant with tax and legislation with entities such as the South African Revenue Service and the Unemployment Insurance Fund. Companies are required to submit two years of financial statements by a registered accountant indicating that the company is ‘distressed’.
Companies must also submit a distress project execution plan, 12 months cash flow projections including estimations for the incentive, key financial indicators for the current and past two years in the form of revenue, net profit, labour expenses (wage bill), net assets, net current assets, current and total liabilities.
They will also be required to submit operation costs, as well as a list of creditors, inclusive of debt and relevant arrangements for “distressed” companies.