Businesses that have been affected by the current lockdown can now apply for a special loan guarantee under the COVID-19 loan scheme.
President Cyril Ramaphosa first announced the R100 billion loan facility last month to assist financially distressed companies with an annual turnover of less than R300 million.
National Treasury, the South African Reserve Bank (SARB) and the Banking Association said in a joint statement that most major banks will accept loan applications under the scheme from distressed businesses which bank with them.
Head of Equities at Aluwani Capital, Patrick Mathidi says, “It’s a guarantee, not cash that’s available like other relief measures. But the banks will be allowed to lend up to R100 billion with an option of increasing that to R200 billion to businesses that have a turnover of less than R300 million. That is aimed at covering them through this difficult period and those loans will be guaranteed by the government. Meaning that if any of them go bad, government will pay back money to the bank, it’s a nice way of government assisting without giving money out.”
The loans are intended to meet urgent requirements such as salaries, rents and contractual obligations.
“The loan amount will be disbursed to the customer in up to three monthly installments,” the Treasury said in a statement, adding banks would carry out due diligence on borrowers.
The companies will not have to pay anything back to the banks for the first three months and will then have five years to pay off the loan and interest.
National Treasury says all major banks are part of the scheme and will share the risks with the Treasury according to a pre-determined loss-sharing mechanism.-Additional reporting by Reuters
In the video below, President Ramaphosa announces a R500 billion COVID-19 economic stimulus package:
