The Eastern Cape Development Corporation (ECDC) says it has reviewed the Eastern Cape Jobs Stimulus Fund to accommodate businesses that are in distress due to the effects of COVID-19.
This follows an announcement by 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 for the 2020/21 financial year.
In its initial form, the ECDC- administered Jobs Stimulus Fund only provided a once-off incentive of R10,000 per job saved or retained to qualifying distressed companies. The company was required to save/retain a minimum of 10 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.
“The review of the Jobs Stimulus Fund policy and the additional R75 million commitment, is a response to the onset of the COVID-19 pandemic which has necessitated that additional funding be made available to mitigate its impact on the provincial economy,” says ECDC head of development finance and business support, Tandeka Rozani.
“The ECDC has thus reviewed the Jobs Stimulus Fund policy to allow for participation of distressed businesses affected by COVID-19 in all the provincial priority sectors.
“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.”
Rozani adds that in an attempt to respond to the current pandemic (COVID-19), 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 01 April 2020 until the 31 March 2021.
“The additional incentive will cater for three months working capital for rental, salaries and other key operational expenditure,” she describes.
” 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. It will supplement the normal once-off R10 000 per job allocation.
All businesses with an annual turnover above R20 million, will only be entitled to apply for the normal R10 000.00 per job saved or retained, and will not qualify for the additional working capital incentive.
“Already, applications from distressed businesses have been approved to the value of R5.81 million which translates to 581 jobs being saved/retained. A large number of applications are currently in the pipeline for consideration as from 01 August 2020 due to high demand for COVID-19 relief support,” says Rozani.
In order to qualify, the following will be highly considered:
- Companies with100% South African shareholding;
- Companies must Retain/Save a minimum of five jobs;
- Employees must be permanent or with a two-year fixed-term contract;
- Employees to be 70% South African;
- Companies must be compliant with tax and legislation with entities such as the South African Revenue Service and the Unemployment Insurance Fund.
For companies applying for distress and the retention of jobs at risk, they are required to submit two years of signed financial statements by a registered accountant, creditor accounts and/or management accounts indicating that the company is “distressed.”
She says in addition, companies must 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.