JOHANNESBURG - Since the government launched the R200 billion loan scheme to help financially distressed small businesses keep afloat during the Covid-19 pandemic, only R11.7bn has been transferred to companies, according to the National Treasury.
In other words, more than R188bn is sitting in the banking system at a time when some desperate enterprises have not opened their doors since the lockdown started on March 27.
Of the roughly 35 800 businesses that applied for an average loan of R1.4 million, only 8 542 were successful. The rest did not meet the lending and risk requirements of the top banks (9 956), were not eligible for the loans (3 662) or their applications are still being assessed (13 710).
The Treasury submitted that the operating and business model of the Covid-19 Loan Guarantee Scheme failed to achieve its intended objective to support stressed small and medium-sized enterprises.
The Treasury blames the commercial banks for using old and normal creditworthiness assessments to evaluate qualifying businesses, while deploying onerous risk assessment methodologies.
In the interim, TransformRSA president Adil Nchabeleng said a large number of black-owned businesses were being sidelined and started to mobilise affected businesspeople and the global community to get the domestic banks to support distressed enterprises.
TransformRSA decided to file a discrimination case with the Equality Court, as many business applications were rejected by the top five banks.
TransformRSA is also concerned that the top banks were cloning and restructuring old loans of their clients to benefit from the generous incentives of the Covid-19 Loan Guarantee Scheme.
It seems that the Ramaphosa administration and its advisers learnt nothing from the Mbeki administration when implementing the 90 percent government guarantee scheme, the top five banks were making millions in fees and administrative charges.
Former president Thabo Mbeki was insistent and emphasised the importance of shared growth by all our people, government, labour, business and civil society to work together to bring about the higher rates of growth and development that our country needs.
As a deep critical thinker and innovative problem solver, Mbeki submitted that the Second Economy (or the marginalised economy) is characterised by underdevelopment, contributes little to the gross domestic product, contains a big percentage of our population, even though incorporates the poorest of our rural and urban poor, and is structurally disconnected from both the first and the global economy, and is incapable of self-generated growth and development.
To summarise the methodology and approach of the Mbeki administration, that approved the concept of active partnership with all to strengthen the second economy.
The Integrated and Sustainable Rural Development Programme, the Urban Renewal Programme, and the Expanded Public Works Programme were instruments of inclusivity while boosting infrastructure spending, as well as the development of SMMEs and co-operatives, and black economic empowerment and special programmes for women’s economic development. None of these programmes is evident in the Covid-19 Loan Guarantee Scheme.
Covid-19 provided an opportunity for the expansion of micro-credit to enable the poorest to engage in productive economic activity, while the incorporation of the unemployed youth within the Skills Development Programmes.
The focus of the Covid-19 Loan Guarantee Scheme did not even consider to create more opportunities for the rural poor.
Narrowness of the consortium between the Treasury, the SA Reserve Bank and Banking Association of SA as implementation agents must be questioned to strengthen the gap between the first and second economy.
The Mbeki administration formalised presidential working groups to encourage an ongoing dialogue between the government and representatives of civil society formations, non-governmental organisations, business and trade unions.
As the wheels of the Covid-19 Loan Guarantee Scheme started to come off, Finance Minister Tito Mboweni introduced a rapid review last month with the stipulation that enterprises in the second economy could benefit more from the scheme.
The urgent reforms introduced by Mboweni include that bank credit assessments and loan approvals will be more discretionary and less restrictive; business restart loans will now be available; banks should use their discretion on financial information required; and bank or financial statements be used where audited financial statements are not available.
The Ramaphosa administration should not have trusted the top banks to act in the best interest of the economic participants in the second economy.
The top banks are not interested in lending to SMMEs. The World Bank research paper, Bank Financing of SMEs in Five Sub-Saharan African Countries: The Role of Competition, Innovation and the Government, confirmed that lending to SMEs remains limited.
A leopard does not change its spots.
Dr Dennis George is executive chairperson of African Quartz.
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