IDC gives 'bailout' conditions

Johannesburg - The Industrial Development Corporation (IDC) has stressed that financial support it plans to extend to companies in distress will not be a "free lunch".

"We can't be Father Christmas in June," said IDC chief economist Lumkile Mondi. "South Africa can't afford European or US type of bailouts."

In his state of the nation address on Wednesday, President Jacob Zuma referred to the IDC's programme to assist distressed firms.

The IDC said aid would be given with loans, debt-to-equity instruments or by taking direct equity stakes in the companies. The organisation added that it would also guide business strategy and lead troubled companies along the path of recovery.

Mondi said companies qualifying for help would include those that have proved they can make money before the market crisis, and firms with a long-term strategy. Companies focused on the international market will also be favoured.

"We need to create competitiveness in the export basket," said Lumkile.

South Africa's manufacturing sector is in crisis. Output from the sector fell 11.7% in March 2009 compared to the same month in the previous year. This compares to a 15% year-on-year drop in February.

Activity in the motor industry has ground to a near halt because of extremely slow demand for new cars.

Earlier this week, Roger Pitot, head of the National Association of Automotive Component and Allied Manufacturers, said that a few of the organisation's members had already applied for help from the IDC.

The IDC will not disclose the amount it has available to assist troubled businesses.

"We don't want to encourage rent seeking," said Lumkile. "But we are open for business."

- Fin24.com