A multi-billion loan guarantee scheme announced by President Cyril Ramaphosa last month is set to begin operating from Tuesday, with the assistance of the country’s major banks, including FNB, Investec, Standard Bank and Absa.
According to a joint statement issued by National Treasury, The South African Reserve Bank and the Banking Association of South Africa, the legal details have been finalised, allowing the scheme to be activated.
Ramaphosa announced the scheme in April as a measure to soften the blow of the coronavirus pandemic and the subsequent national lockdown on banks as well as their individual and business clients.
The loan guarantee scheme is intended to assist businesses with an annual turnover of less than R300 million to meet operational expenses. The South African Reserve Bank's loans to commercial banks will be guaranteed by National Treasury.
Treasury initially provided a guarantee of R100 billion to the scheme, with the option to increase to R200 billion if the scheme is deemed successful.
"The loan guarantee scheme is an initiative to provide loans, guaranteed by government, to businesses with an annual turnover of less than R300 million to meet some of their operational expenses," said Treasury, adding that government was sharing the risk of the loans with commercial banks.
Treasury said the funds borrowed through the scheme could be used to cover the operational expenses of banks, pay salaries, and cover rent and lease agreements.
Economist Dr Francois Stofberg said the amount was enough to assist consumers, but the survival of big businesses and SMMEs was hanging in the balance depending on how fast government could finalise assistance.
He added that there was a "significant" need among businesses.
Stofberg credited government, saying they have done a lot to keep the ship afloat for consumers.
He said while about one million two hundred thousand people have applied for a payment break, this was still only 8% of the tax base and there was room for government to focus on helping businesses.