The Edcon group was forced to apply for voluntarily business rescue which might result in liquidation because it was unable to raise further funding to keep the operations going.

The investment was made chiefly on the basis that one of the mandates for the UIF is to help in job creation or preservation and Edcon at the time employed roughly 38,000 employees directly and an estimated 100,000 jobs indirectly.

"We estimated that a loss of 38,000 direct Edcon jobs would have led to total UIF benefit payments of R1.2 billion over a period of 8 months, assuming an average monthly payment of R4,000 per employee. A further R2.8 billion benefit payments were estimated based on the indirect jobs that would have been lost to textile industry and creditors from closing down Edcon," said UIF Commissioner Mr Teboho Maruping.

On June 25 2019, the PIC, on behalf of the UIF, duly　 invested R1.2 billion in Edcon Limited through the UIF’s SRI (Social Responsible Investment) mandated asset class in exchange for a 19% shareholding stake as part of the Company’s restructuring.

One of the considerations for the investment was the effect on allied industries if Edcon was allowed to fold.

"Research shows that only 30% of South African clothing retail products are sourced locally. This is mainly due to the recent introduction of European clothing retailers and this investment had an intended effect of supporting the group to grow locally produced products which was the company’s strategy and also was a good fit with what the government would like to see – investment into local industry," said Maruping.

Unfortunately for Edcon, a variety of factors saw it unable to meet its obligations. One of these factors was due to the Covid-19 pandemic and Edcon was hard hit by the responsive measures introduced by the government.

The first announcement of restrictions saw Edcon’s revenue decline by 45% (R155m) relative to anticipated forecasts.

The second announcement calling for a 21 days nation-wide lockdown, and the extension thereof, completely inhibited Edcon’s ability to trade with the result that no revenue was recorded during the lockdown period as clothing retail was excluded from essential services.

Compounding the cash shortfall was the decline in debtors book collections as collection could only be done via walk-ins and the totality of this liquidity distress position resulted in its inability to service its creditors.