Third of state’s R500bn relief package may end up unused

THE NATIONAL Treasury does not plan to ease the criteria of its coronavirus loan scheme to stimulate uptake which means that almost a third of the government’s R500 billion relief package may end up unused.

The R200bn loan programme is a pillar of the government’s efforts to shield small businesses from the impact of the pandemic. Conditions were tweaked in July, including expanding who qualifies and extending the repayment grace period, after relatively few firms applied. Only R14.5bn had been paid out until August.

The Banking Association of SA (Basa) estimated that at most about R44bn would be deployed by January. Despite this, Treasury said it was not planning to ease the scheme further to increase disbursals.

“The low uptake of the scheme also suggests that businesses do not want to incur more debt in light of the economic uncertainty,” it said.

It added that the economy’s reopening following a months-long lockdown meant firms would now need less financial support.

The Treasury said it was also not considering releasing any of that amount as grants, as suggested by some trade unions.

Under the scheme, government pledges to reimburse banks for a portion of any eventual losses on qualifying loans with the aim of lowering borrowing costs and making credit available to businesses that might otherwise be considered too high risk.

By the end of the last month, 35 percent of 42 202 loan applications were rejected for not meeting the scheme’s or banks’ risk criteria, according to Basa.

More funds, more than R30bn, were disbursed under other earlier relief initiatives from lenders, such as payment holidays. This, as well as high levels of uncertainty and low business confidence, suppressed demand for the guaranteed loans, Basa has said.

South Africa had to balance the desire to extend relief to businesses against the need to safeguard Treasury’s already strained resources, said Prudential Authority head Kuben Naidoo.

“If we had a different fiscal position, I think we could have designed the scheme differently,” he said, but added the scheme had contributed to easing the impact of the crisis, along with other relief measures.