The Banking Association of South Africa (BASA) has announced that R7 billion in loans have been approved to assist 4 800 small and medium businesses affected by the coronavirus (COVID-19) and the lockdown.  In April, President Cyril Ramaphosa announced that a COVID-19 loan guarantee scheme of R200-billion would be extended to small businesses affected by the pandemic.

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BASA has pointed out that the banks and government share the risk of the loan guarantee scheme; however, the banks are the ones who provided capital for the initiative.

It was further agreed that the banks would absorb the first 6% of the risk.

Managing Director at BASA, Bongiwe Kunene says the first tranche of the scheme amounted to R100 billion.

“There is no money that was injected by government to the banks. The banks are using their own capital to carry this loan guarantee scheme, how it was negotiated.  First, we talked of a R100 billion that is set aside for loans to small businesses for operational costs. We have an option that this first R100 billion, once it has been used, it can be increased to R200 billion.”

BASA says this month marks the end of the COVID-19 relief measures extended to customers and small businesses during the lockdown period.

Kunene has stressed that the relief measures in the form of payment holidays did not amount to a write-off on the debt, but instead leniency.

“It was meant to be three months, and the three months started for some in March for others in April.  So we know that the end of June marks the end of the first wave of relief.  For the customers who require an extension, we have advised that they should contact their credit providers.”

Kunene says the revised credit agreements will continue to incur interest. She says the book value at risk is almost R490 billion for all the banks providing COVID-19 relief measures to their customers.

“At the beginning of June, we had R2.28 million individual credit agreements which were reworked.  And companies in South Africa, small and medium, we had a R124 000 of this relief extended to the commercial enterprises. We were very clear from the onset that the fees and interest will accumulate because banks have to cover costs and depositors’ interest.”

The country’s major banks have donated over R200 million towards COVID-19 social relief efforts.