Development financier, the Eastern Cape Development Corporation (ECDC) says it disbursed loans to the value of R122,7 million to 265 businesses in the 2013/14 financial year.
Announcing the financier’s performance results, ECDC acting chief executive Reggie Naidoo says this is despite ECDC approving R102,8 million to 313 enterprises in the same period.
“The higher disbursement figure is a result of disbursements against loans which were approved in the previous financial year. Of this amount, ECDC collected R152 million in loan repayments which are important to ensure that its finance support reaches a broader base of deserving entrepreneurs.
“These financial instruments facilitated the creation and saving of 1 320 jobs. Furthermore, 85 youth-owned businesses received disbursements of R21 million while R13 million went to 78 women-owned enterprises. ECDC intends to grow its development finance contribution to previously marginalised groupings, especially to women and people with disabilities,” Naidoo says.
Naidoo says ECDCs loan instruments are effective tools for improved job creation and poverty alleviation in the province. Furthermore, by its very nature, ECDC has a high-risk appetite which demands of it to walk a tight rope in balancing development imperatives and financial efficacy.
He says despite formidable challenges that confronted the financier in 2013/14, ECDC crafted innovative solutions to enhance shareholder value and confidence by taking the requisite steps for improved financial and commercial sustainability.
Naidoo says this is aptly demonstrated by ECDCs steady financial performance reflected in a stable balance sheet boasting a net asset value of R1 billion up from the previous year’s R967 million. The balance sheet reflects a healthy cash balance with the net asset value being mainly driven by the high value of investment property. The operating loss for the period under review improved from R57 million in the previous year to R34.1 million in 2013/14.
“In essence, the corporation’s sustainability will be realised by a balance sheet that reflects a healthy loan book for an improved development impact. As such, ECDC continues to advocate for improved shareholder capitalisation which should lead to a loan book significant enough to effectively respond to the needs of its customers while accruing the desired socio-economic dividend for the province.
“However, for the first time since 2007, ECDC has received a qualified audit opinion. This is attributable to the Auditor-General’s finding that there were irregularities in the regarding payments on invoices related to the former state president’s funeral in December 2013. ECDC also draws emphasis to the fact that it has not been qualified on the basis of its operations and core business,” Naidoo explains.
The property business remains ECDCs biggest asset accounting for R725 million of its balance sheet while loans account for R120 million.
As such, focus has shifted toward putting in place strategies that should improve overall financial performance with the aim of growing revenue as well as the introduction of sufficient revenue streams.
He says while ECDCs core interventions as a development finance institution are financial in nature, the corporation also possesses real innovative business support instruments which build business competitiveness. These support tools come in the form of mentorship, market access opportunities as well as business and financial management skills support programmes.
In the review period, 100 new enterprises were assisted with business planning while 80 existing businesses were supported with marketing and branding services. A total of 272 small businesses in priority sectors were assisted with pre and post finance support up from the previous year’s 204.
In addition, ECDC has been entrusted by its shareholder, the Department of Economic Development, Environmental Affairs and Tourism (DEDEAT), to manage a portfolio of special funds, in particular, the Imvaba Co-operative Fund and the Eastern Cape Jobs Stimulus Fund. While the Imvaba Co-operative Fund supports the establishment of co-operatives as business vehicles driving the rural economy, the Jobs Stimulus Fund supports the real creation, saving and retention of jobs in the more formal business sectors, particularly manufacturing, green economy, tourism, manufacturing, petrochemicals, capital goods, ICT and electronics, BPO and services as well as agro-processing.
During the period under review, a total of R10,6 million was approved for 24 new co-operatives. In the same period, R11.9 million was disbursed to these 24 co-operatives as well as others approved for funding in the previous year. In 2013/14, the Imvaba Co-operative Fund spent a further R5.6 million on non-financial support for approved co-operatives.Similarly, the Eastern Cape Jobs Stimulus Fund disbursed R26.7 million to 50 businesses which in turn supported the creation, saving and/or retention of 2 670 jobs in the period under review.
Naidoo says ECDC has increased support to projects which have the potential to unlock tangible economic benefits. Through its risk capital facility ECDC invested R8,7 million to support the preparation of projects for further development and research into market-ready products. It also attracted R104 million in third-party funding.
In addition, ECDC continues to advocate for increased domestic and foreign direct investment into the Eastern Cape economy. During the review period, ECDC facilitated investments into the province valued at R487 million.In the period under review, ECDC facilitated exports valued at R1,53 billion.
ECDC continues to own and manage a large residential and commercial property portfolio. Rental revenue of R59.8 million was collected during 2013/2014 – 8% more than in the previous financial year.
Following the decision to offload non-performing and non-revenue generating properties through a batched approach, a total of 42 stand-alone residential properties valued at R44,6 million were disposed off in a public process.
“Despite the Eastern Cape’s economic challenges, ECDC will continue to focus on growing key sectors of the economy and further support enterprises to create jobs as well as the implementation of business viability and skills development interventions.
“A key challenge which will be addressed in the future is the balancing of short-term bridging finance products with longer-term, lower-risk loans earmarked for the manufacturing, infrastructure, agro-processing and green energy sectors. The corporation is targeting these sectors in order to grow and maintain a sustainable loan book while accentuating economic development for the benefit of the province and its people,” Naidoo explains.
He says this work should further crystalise ECDC’s vision of entrenching itself as an inspired high-performing development financier which provides real finance, real business support, real resources as well as real investment and trade platforms.
Alan Straton
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