The National Treasury has defended the R200billion loan guarantee scheme, which was introduced to support businesses impacted by the Covid-19 impact.
The National Treasury has defended the R200billion loan guarantee scheme, which was introduced to support businesses impacted by the Covid-19 impact.

National Treasury defends R200bn guarantee to support businesses

By Siphelele Dludla Time of article published Jul 24, 2020

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The National Treasury has defended the R200billion loan guarantee scheme, which was introduced to support businesses impacted by the Covid-19 impact.

Treasury’s chief director for financial markets and stability Dr Roy Havemann told Parliament yesterday that evidence suggested that the scheme was reaching the target market of small emerging companies.

Havemann said most companies preferred restructuring existing debt rather than taking on more, and were waiting on further guidance on lockdown measures before taking on debt.

He said there were still concerns about the overall uptake of the scheme as there was a lot of uncertainty over the future of business in the country.

“The take-up was initially quite slow, but it has been rising. By this week seven we have had 35772 applications received, so far 8 542 have been approved totalling R11.7 billion and the average loan is about R1.4million,” Havemann said.

“There are still 13 710 applications being considered, and of those that were not approved 9 956 did not meet the banks’ risk criteria, while 3662 were not eligible.

“We were quite concerned about the slow take-up of the scheme and we have had a lot of engagement with different stakeholders to identify what the reasons were and to see how we could make changes to the scheme.”

The scheme, launched by President Cyril Ramaphosa as part of the R500bn comprehensive economic response package, has been criticised for failing to assist small businesses.

It is backed by SA Reserve Bank and enables banks to offer loans to companies with a turnover of under R300m.

The loans could be used to cover overheads such as rent, payroll, debt service costs and other fixed costs.

Havemann said 54percent of loans went to companies with turnover of between R1m and R20m.

Finance Minister Tito Mboweni was more optimistic about the current and future status of the scheme to help boost business activity.

Mboweni said the Treasury expected more lending to take place as businesses retool themselves to restart and adapt as the economy was gradually reopening. “We have made changes to the scheme, effective from today,” Mboweni said.

“This includes business restart loans, aligning the credit assessment criteria, increasing the length of the loan draw-down and repayment period, and relaxing the credit risk criteria.

“Further details are on the websites of the National Treasury, South African Reserve Bank and the Banking Association.”

Havemann said the majority of loans, 54 percent to be exact, were to companies with turnover of between R1m and R20m.

“Further details are on the websites of the National Treasury, South African Reserve Bank and the Banking Association.”

BUSINESS REPORT

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