Development financier, the Eastern Cape Development Corporation (ECDC) says it has disbursed R96,5 million in loans to 261 enterprises which resulted in the creation, saving and retention of 1,431 jobs in the 2014/15 financial year.
Announcing the financier’s annual results, ECDC chief executive officer Buhle Dlulane with effect from December 1, says ECDC also collected R141 million in loan repayments in the same period. A total of R12 million went to 116 youth-owned businesses and R15,4 million went to 64 women-owned enterprises.
“Of the R96,5 million disbursed, R38,7 million went to NEXUS loans or otherwise called government invoice-based loans. These are the loans where contractors have a contract from government and ECDC takes a cession on the contract. NEXUS loans make up 40% of the total loans disbursements.
Workflow contractor loans or contractor loan finance, stands at R42.3 million or 44%. Powerplus or small business and start-up loans were R6.7 million or 7% and finally Termcap or long-term loans accounted for R8.7 million or 9% of the loan disbursements. The strategy is to push term cap loans to 65%. Long-term loans are required for the desired sustainability,” says Dlulane.
In terms of the sector profile, 49% of loans went to construction, 35% to services, 6% to manufacturing; 5% to retail, 2% to agriculture and agro-processing and the remaining 3% to other sectors. The services sector is a combination of nexus loans, fuel stations and hospitality.
In respect of the geographic spread, the Amathole District Municipality R8million (8%), Alfred Nzo R26 million (27%), OR Tambo R19,1 million (20%), Nelson Mandela Bay R16,5 million (17%), Chris Hani R4,8 million (5%), Joe Gqabi R1,3 million (1%) , Cacadu R867 000 (1%)and Buffalo City R19.8 million (21%).
“The loans bias toward regions such as Amathole, OR Tambo and Alfred Nzo) is a clear indication of ECDCs resolve to support government’s efforts in ensuring that rural municipalities are developed to an extent that sustainable economic activity is created within these areas to slow down the pace of urbanisation in line with the PDP,” Dlulane.
ECDCs balance sheet remains strong in that its total assets exceed total liabilities debt by R1,1 billion. The driver for this positive book value is mainly the increase in the value of investment properties.
Dlulane says the balance sheet reflects investment properties valued at R908 million compared to R102 million for loans. Loans and investments should ideally make up 80% of the balance sheet. Generally, DFIs need to have a combination of an investment earning book and loans. This has necessitated the ECDC Board to take a decision to dispose a certain portfolio within its investment properties in order to improve cash availability for the developmental mandate.
“Currently, ECDCs cost of packaging development loans is being incurred by the corporation without shareholder funding. Funding for loan disbursements comes from ECDC operations, specifically loan repayments. The costs of packaging remain high which compromises ECDCs liquidity or cash position which remains under pressure. Current discussions are underway and ongoing with the shareholder on capitalisation to deal with huge costs of packaging loans,” explains Dlulane.
During the review period, a total of 337 SMMEs received non-financial support throughout identified economic sectors, with ongoing support provided to an additional 27 SMMEs.
Furthermore, ECDCs risk capital facility spent more than R17,5 million in support of entrepreneurs who presented viable business ideas. The support came in the form of feasibility studies, trials and pilots, market studies and environmental impact assessments. These interventions led to the creation of 469 jobs and the facilitation of third-party funding amounting to R93 million.
In addition, the corporation continued to sharpen its investment and trade promotion instruments in the period under review. In 2014/15, ECDC facilitated investments of R672 million into the province and trade in priority sectors such as manufacturing, agro-processing, forestry, ICT and Film as well as renewable energy.
ECDCs Integrated Social Infrastructure Delivery Programme spent some R59 million in the period under review in the implementation of Makana Local Municipality’s water crisis intervention programmes. An amount of R98,2 million has been allocated to this project over the next two years. The programme is focused on six intervention areas namely electrification, major pump station capacitation, raw water rising mains, plant production and supply capacity as well as water loss control.
The corporation’s property portfolio stretches across the province and has the potential to create significant rental income. However, a critical aspect of this is the need for rationalisation of assets, particularly the disposal of non-performing and non-revenue generating stock and the development of vacant land to increase potential rental income. Income generated from the disposal of the identified assets will be used to revitalise high-potential properties.
Rental revenue collected from the overall property portfolio stands at about R61 million. ECDC also continued with the disposal process of standalone residential houses with huge interest shown. Some 19 vacant properties have already been sold. An additional 10 are in the process of final award.
A total of 120 properties valued at R86.2 million are in the process of being transferred to current tenants. This has ensured security of tenure and ownership for those that have occupied these houses on a leasehold agreement. ECDC is currently processing offers to purchase the remaining standalone units.
A disposal agent has been appointed to help expedite the disposal process so as to unlock ECDC investment opportunities.
The Imvaba Co-operatives Fund regained momentum disbursing R8.3 million to 38 co-operatives and approving an additional R10 million to 20 new co-operatives. This support has resulted in the creation and/or retention of 531 direct jobs. The bulk of these co-operatives are involved in agricultural activities, supporting one of the province’s priority sectors.
The consideration of a number of distressed companies for the Jobs Fund incentive has culminated in the commitment of R4.25 million to 10 SMMEs to assist them with saving or retaining as many as 425 jobs within their enterprises.
“Moving forward, the corporation will focus on the efficiency of operations and ensuring that its human capital is adequately capacitated to carry out ECDCs mandate. The roll-out of the ERP system will become a priority to ensure the integrity of operations and sleek mandate execution. Greater focus will be placed on improving ECDCs loan finance tools and technical support to ensure that they respond effectively to the demands of the small business sector. The ultimate objective is to assume the posture of a responsive and high-performing development finance institution,” Dlulane says.
Alan Straton
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