Ramaphosa’s R200 billion virus stimulus is way short of target

0:00
play article
Subscribers can listen to this article
President Cyril Ramaphosa’s stimulus plan has not had the reach it was expected to have. Picture: Supplied
President Cyril Ramaphosa’s stimulus plan has not had the reach it was expected to have. Picture: Supplied

BUSINESS


A R200 billion loan program, one of the linchpins of President Cyril Ramaphosa’s plans to shore up an economy devastated by the Covid-19 coronavirus pandemic, may not even reach 10% of its target.

Banks have distributed R17.8 billion since the initiative started in May last year through to January 16, the Banking Association of South Africa said in a statement on Wednesday.

At the current rate, only R18.9 billion will be allocated under the plan, it said.

Ramaphosa’s administration last year unveiled a R500 billion support package by reprioritising spending from existing budgets, setting aside R100 billion to protect and create jobs, and R50 billion for welfare.

Banks were roped in to distribute loans guaranteed by the government to help small- to medium-sized businesses navigate through the crisis, starting with R100 billion rand of disbursements before doubling up.

“Demand for the scheme remains significantly below the original expectations,” the banking association, which includes lenders such as Standard Bank and Nedbank, said.

“Participating banks expect applications for the scheme to slow down further in the coming months.”

Business owners remain reluctant to incur more debt, due to the challenges presented by inconsistent policy and regulation.
Banking Association

By the time the program was ready to be rolled out, businesses were already reeling from one of the world’s strictest lockdowns, instituted in March, and had made arrangements with their lenders.

With the country going through different levels of restrictions since then to contain the Covid-19 outbreak - from a ban on alcohol sales to curfews and keeping people off beaches - many companies and consumers are still struggling to cope.

Read: African central bankers have run out of policy space to fight recessions

Company liquidations last year soared to the highest level since 2012, according to government data.

DEBT SHY

“Business owners remain reluctant to incur more debt, due to the challenges presented by inconsistent policy and regulation, uncertain business conditions and a weak economic outlook,” the association said.

The slow pace of economic reform, unreliable electricity supply, lack of inclusive growth, and weak consumer and business confidence is hindering the need for credit.

The Covid-19 Loan Guarantee Scheme on its own cannot address all of the financial and business challenges facing small enterprises.
Banking Association of South Africa

Many companies also fail to qualify under the initiative’s criteria, even after some of the rules were relaxed to drive demand.

As of January, banks had received 48 366 loan applications of which 27% were approved and taken up, 46% were rejected, and 5% are still being assessed.

Read: The economy needs its own perestroika

By November 21 last year, banks had approved R17.49 billion in loans.

“The Covid-19 Loan Guarantee Scheme on its own cannot address all of the financial and business challenges facing small enterprises, many of which pre-date the pandemic,” the banking body said.

“Government will have to implement other business and financial support programs.” –Bloomberg


facebook
twitter
linkedin
instagram

Delivering the 

news you need

+27 11 713 9001
news@citypress.co.za
www.citypress.co.za
69 Kingsway Rd, Auckland Park
We live in a world where facts and fiction get blurred
In times of uncertainty you need journalism you can trust. For only R75 per month, you have access to a world of in-depth analyses, investigative journalism, top opinions and a range of features. Journalism strengthens democracy. Invest in the future today.
Subscribe to News24

E-Editions

Read the digital editions of City Press here.
Read now
Voting Booth
The EFF has sent a legal letter to President Cyril Ramaphosa’s office, demanding that the lockdown regulations be relaxed to allow political gatherings in compliance with all Covid-19 protocols. The party said that regulations prohibit political campaigning and activities in preparation for this year’s local government elections.
Please select an option Oops! Something went wrong, please try again later.
Results
Like church members, political party members should gather
19% - 18 votes
I fear the third wave
45% - 44 votes
Hold off on the elections
36% - 35 votes
Vote