BACKGROUND

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The Eastern Cape is faced with the persistent challenges of poverty, inequality, unemployment, and stagnant economic growth. The unemployment rate as at Q3 2022 was 42.4% (with youth unemployment being 53.6%), while poverty levels were last surveyed at 67.3% for the province’s population. Over the past 5 years, provincial economic growth has averaged -2.26%, including the major economic

downturn in late March of 2020 due to the declaration of a national state of disaster, and the resultant instituted lock-downs. Exacerbating this picture is the challenge of youth unemployment and excessive levels of inequality; both of which are potential triggers for social unrest and hopelessness. To reverse the picture, it is necessary that the province institute extraordinary measures to stimulate economic growth and reduce poverty and joblessness.

 

The Eastern Cape Provincial Government in response to its economic development challenges, has established the Economic Development Fund as an instrument that is geared towards the activation of industrial development and economic growth which in the medium- to long term is expected to yield financial, economic, and developmental returns. Key objectives of this Fund include reduction of unemployment and alleviation of poverty, stimulation of the economy as well as industrial development.   

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FUND DESCRIPTION

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The core mandate of the Economic Development Fund (EDF) is to position the province as a competitive investment destination through investment in initiatives, programmes, projects, and ventures that are developmental and commercially sound; stimulate economic growth and equitable development; supporting entrepreneurship, and to create sustainable employment opportunities.

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The modus operandi of the EDF is to facilitate economic growth, employment, and industrial development in the Eastern Cape.

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The Fund will discharge its mandate through specific fund products, designed to respond to identified developmental and commercial objectives. These constituent instruments (sub-funds) shall have sub mandates that respond to the unique needs of targeted beneficiaries or industries.

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Funding allocation:

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• To bolster fund sustainability, roughly 60% of fund resources will be invested in initiatives that offer defined financial returns on investment. The remaining 40% will be invested in initiatives that offer economic and developmental returns. Envisaged initiatives relating to the 40% fund allocation include interventions such as industry/value-chain activation, SMME development, and youth employment programmes.

• In relation to economic returns, the terms for the funding shall be informed by economic research; economic development intelligence; specific project potential, and targets. Commercial sustainability; job creation potential; youth empowerment; economic inclusiveness, and private sector participation are critical factors that will influence funding considerations.

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At fund product-level, specific returns relating to financial and economic objectives will be stipulated - informed by each product’s funding objectives - while taking cognisance of the overarching fund objectives.

 

In relation to economic returns, the terms for the funding shall be informed by economic research; economic development intelligence; specific project potential, and targets. Commercial sustainability; job creation potential; youth empowerment; economic inclusiveness, and private sector participation are critical factors that will influence funding considerations.

 

The funding allocation for each fund product will be informed by a high-level resource allocation model, approved by the Fund Governance and Operational Framework Committee.

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FUND OBJECTIVES

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The modus operandi of the Economic Development Fund is to:

 

• facilitate economic growth;

• create employment opportunities; and

• catalyse industrial development in the Eastern Cape.

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Below are other key objectives that fall within the scope of the EDF:

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FUND PRODUCTS

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• The Fund will discharge its mandate through specific fund products, designed to respond to identified developmental and commercial objectives. These constituent instruments (sub-funds) shall have sub mandates that respond to the unique needs of targeted beneficiaries or industries.

• At funding product-level, specific returns relating to financial and economic objectives will be stipulated - informed by each product’s funding objectives - while taking cognisance of the overarching fund objectives.

• The funding allocation for each fund product will be informed by a high-level resource allocation model, approved by the Fund Governance and Operational Framework Committee.

• A general architecture for the guidelines for these 10 funding instruments was developed in tandem with the overarching draft governance and administration framework.

• Close integration with the 15 objectives listed in the Governance of the EC EDF has been established on product-level, with each of the 10 funding product frameworks transposing and adapting some (or all) of those objectives.

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