By Kopano Gumbi, CNBC Africa’s markets reporter
The Unemployment Insurance Fund – paid for by millions of taxpayers -has confirmed that it will bail out indebted South African retail giant Edcon.
Hyprop has also arranged to support Edcon. This may include the property company subscribing for an equity interest in Edcon.
Edcon occupies 66 781m2 of space at South Africa’s largest listed specialised shopping centre Real Estate Investment Trust’s malls or 9,2% of gross lettable area, and 7,6% of rental income in South Africa.
In a Sens statement Hyprop said it “has worked with Edcon to reduce their space requirements. Agreement has been reached with Edcon for 7 563m2 to be returned in the short term. New tenants have been secured for most of this space and Hyprop is confident of its ability to re-let the balance”.
The struggling fashion retailer, which owns household names Edgars and Jet, shocked the market last year when it announced that it would need R3.5billion to stay afloat.
It is understood that the business went to investors at home and abroad for the money, but many were skeptical.
Over 100,000 jobs are on the line in a country that is already bleeding jobs and has an unemployment rate of 27.1 per cent, according to Stats SA.
The Edcon Group also approached the Public Investment Corporation in December. According to Sinesipho Maninjwa, an independent analyst, Edcon did not meet the investment criteria set out by the PIC, largest asset manager in Africa.
The reason why the UIF was roped in was because of its “socially responsible investment policy” under which a transaction like this could save jobs.
Grant Pattison, the CEO of the Edcon Group, confirmed that today is the eleventh hour in the fight to save the company.