South African IDC loans to the textile industry

THE Industrial Development Corporation (IDC) has approved four applications for loan finance worth R70m from clothing and textile firms, as a government plan to rescue the industry cranks up.

The loan scheme is part of a comprehensive rescue package for the ailing clothing and textile industry, said to be worth R5bn, which is finally being rolled out by the Department of Trade and Industry. Many fear, however, that it may be too late for many firms as they succumb to the harsh conditions of the global financial squeeze.

The core operations of Seardel's textile business, Frame Textiles, announced its closure last month when it failed to secure a lifeline from the IDC. The closure has put 1400 people out of work.

The IDC turned down Frame's request for assistance as it deemed the business not to be economically viable.

Willie Fourie, who heads up the IDC clothing and textile unit, has, however, confirmed that four firms -- three of which are textile firms -- had qualified for loans since the facility was launched. He would not identify the qualifying firms.

Fourie was at pains to dispel perceptions that the IDC would bail out firms, saying the corporation was willing to assist companies but could only do so if this made business sense.

Even so, the corporation would make money available for the upgrade and modernisation of the clothing and textiles industry on extremely favourable terms.

The IDC as a rule extended loans at commercial rates and the attractive prime minus 5% loan scheme was only available to firms in the clothing and textiles industry, because "the IDC felt that the industry needed it to upgrade and modernise", he said.

The IDC had set aside R250m for the scheme, but the capital to be made available would be reviewed on an annual basis, he said.

The scheme was available for the upgrade and expansion of firms, if the investment was in state-of-the-art plants and equipment, in a bid to boost the competitiveness of the industry. The IDC would also consider assisting firms with working capital under the scheme on a need-be basis, if the working capital requirement was as a result of the upgrade, but the corporation had not extended such assistance under the scheme to date.

The loan scheme is one of three assistance packages in the clothing and textiles competitiveness programme which aims to assist the ailing sector.

Clothing and textile firms would also be able to apply for funding under the Department of Trade and Industry's general Manufacturing Incentive Programme, while the guidelines of the third leg of the programme -- a grant scheme -- was likely be finalised this week, a source close to the process said yesterday.

The grant will be awarded at firm or cluster level and will constitute interventions to improve the competitiveness of the industry, aimed at product, people and processes.

At cluster level the state will provide up to 75% of project funding, to a maximum of R25m over a five-year period, and at company level up to 65%, to a maximum of R5m.

This component of the rescue plan will also be administered by the IDC.