Largest SA bank sounds alarm over government’s R200 billion Covid-19 donation loan proposal

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There was disappointment as to how the program fell short of its capacity.

  • A 200 billion rand initiative to provide SMEs with Covid-19 relief, is due to expire on April 11.
  • President Cyril Ramaphosa criticized the country’s largest banks for not having disbursed loans quickly under this initiative.
  • The CEO of Standard Bank rejects suggestions to swap the loans that have been granted for grants.

The Standard Bank Group has sounded the alarm over proposals to revive a government-backed credit program designed to help South African businesses battered by Covid-19.

As South Africa’s largest lender is open to discussions on how to restructure the R200 billion program to increase demand, it rejects suggestions to swap the loans that have been given out for grants. CEO Sim Tshabalala said in the bank’s annual report.

“In addition to the unfair burden that a conversion to grants would place on our depositors and investors, and on taxpayers, we believe that the conversion of loans to grants would set a very undesirable precedent,” he said.

President Cyril Ramaphosa criticized the country’s largest banks for failing to disburse loans quickly under the initiative launched in May. The South African Banking Association said total allocations are unlikely to reach 10% of program capacity.

The program is scheduled to expire on April 11. A review by the banking association found that many business owners had opted for relief agreements with their individual banks rather than program loans.

If the decision is to forgo payment of loans already issued, the cost “would be too high at a time when South Africa is under extreme fiscal pressure,” according to Tshabalala. The country in the meantime needs its resources to pay for vaccines and other medical supplies, he said.

Backup plan

Ramaphosa’s administration unveiled a 500 billion rand support package last year by re-prioritizing spending from existing budgets. Banks have been strung together to distribute government-guaranteed loans to small and medium-sized businesses, starting with R100 billion in disbursements before doubling down.

The National Treasury did not immediately respond to questions about the future of the program after April 11. The South African Reserve Bank referred the requests to the National Treasury.

While there was disappointment as to how the program fell short of its capacity, the banks’ efforts could not go further to counter the effects of the country’s deepest economic contraction in a decade. century, said Tshabalala.

“Good businessmen are never eager to take out a loan unless they are sure of their ability to use the funds productively and their ability to repay the loan,” he said.

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