COSATU has said that the R200 billion loan guarantee scheme announced by the government in May requires decisive intervention and clear political will, which to date have not been provided by the National Treasury and the banks.
COSATU has said that the R200 billion loan guarantee scheme announced by the government in May requires decisive intervention and clear political will, which to date have not been provided by the National Treasury and the banks.

Lack of decisive action may render R200bn loan guarantee scheme stillborn

By Sizwe Dlamini Time of article published Aug 20, 2020

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JOHANNESBURG – COSATU has said that the R200 billion loan guarantee scheme announced by the government in May requires decisive intervention and clear political will, which to date have not been provided by the National Treasury and the banks.

In a written submission by Parliamentary co-ordinator Matthew Parks to Parliament’s Portfolio Committee on Small Business Development on Wednesday Cosatu cautioned that, despite its much-vaunted launch, the scheme remained perilously close to being stillborn.

“R13 billion three months later is a scandal and indictment upon Treasury and the banks, Treasury and the banks must honestly engage at what are the blockages to rolling out the loan scheme.”

Parks said Cosatu continued to support the R200 billion loan guarantee scheme as it was one of the sole lifelines provided for a battered economy with millions of jobs hanging in the balance.

He said it was clear at this rate that this loan scheme would not reach R100 billion, let alone R200 billion. “It, in fact, is unlikely to even reach R50 billion.”

“There are two options. Allow it to continue as is, accept that it is a failure and may not reach 10 percent of the targeted allocation. It will also mean accepting that the economy will move from a deep recession into a depression and that unemployment will push past 50 percent and possibly 60 percent. It will then take at least a decade to recover,” reads the submission in part.

While calling for decisive interventions Cosatu stressed that the loan scheme’s importance was one of the few lifelines for the economy and the survival of millions of workers in the absence of a stimulus plan.

“Every bit of economic, financial and social relief that can be pumped into the economy is supported by Cosatu. It is critical to inject as much as possible into the economy and to provide the maximum amount of relief to workers, consumers, businesses and economic sectors.

“The failure to do so, is to condemn the economy into depression and workers into unemployment and their families into poverty,” said Parks.

Cosatu welcomed the relaxation of the lending criteria by Treasury and the banks at the end of July but added that there was no indication from the banks that this was sufficient or making a dent.

“It is also worrying that to date Treasury has in fact only signed for R100 billion surety and not the R200 billion committed to publicly.

“Government unveiled an economic relief package of R500 billion, yet very little of that has come from the government itself. R50 billion is from the Unemployment Insurance Fund (workers’ money to which government does not contribute), R40 billion worth of bank loan holidays, R70 billion from the IMF and the R200 billion loan guarantee scheme to which Treasury stands surety.

“The R150 billion money that comes from the government is merely a reprioritisation of existing budget allocations. So in essence government is not providing any actual new stimulus into the economy.

“Yet at the same time Treasury is insisting that the banks write off the first R6 billion worth of any losses from the loan guarantee scheme,” said Parks.

He said nitpicking was causing the banks to burden applicants with excessively strict criteria in order to qualify for the loan. “When the government is contributing very little in the way of economic relief for the economy, it simply lacks the moral high ground to lecture the nation.”

BUSINESS REPORT

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