Farmer's Weekly (South Africa)
‘Agri needs surpass R200 million loan guarantee scheme’
Receiving a loan with a six-month repayment delay, such as the recently announced coronavirus disease (COVID-19) loan guarantee scheme, could greatly assist in improving cash flow for qualifying agribusinesses.
However, the sheer size of the agriculture sector, which contributed R106 billion to South Africa’s GDP in 2018, could outstrip the available funds needed to be shared across the different economic sectors.
This was according to Prof Sanlie Middelberg from the School of Accounting Sciences at the Potchefstroom campus of North-West University.
The scheme was created in partnership with commercial banks, National Treasury and the South African Reserve Bank. The objective was to assist businesses with operating costs and payment of suppliers, specifically those with an annual turnover of less than R300 million.
The businesses needed to be registered with the South
African Revenue Service and be in “good standing” with their bank as from 29 February.
Applicants needed to prove that their businesses were in financial distress as a direct result of the nationwide lockdown and that the loan would fund operating costs. Loans would be granted at prime interest rate with a loan repayment holiday of six months, she said.
Agribusinesses that had also been affected by the pandemic could greatly benefit from the scheme. Middelberg said the wine and tobacco industries, for example, had been particularly hard hit by the COVID-19 pandemic, due to the banning of alcohol and cigarette sales during the lockdown period.
The demand for red meat and other agricultural produce such as potatoes, among other commodities, had also declined significantly due to restaurants and other hospitality establishments closing down during the lockdown period. This resulted in large stockpiles, which pushed prices down.
“In some instances, agricultural produce was [also] classified as non-essential [items, resulting in] revenue streams coming to a standstill,” she added.
In a statement, the CEO of FNB, Jacques Celliers, commended government’s initiative to shield vulnerable businesses against the adverse impact of the pandemic.
“A government guarantee allows us to continue honouring our obligation to depositors, while using our credit extension capabilities to be a conduit for government’s support for qualifying businesses. This is further evidence that partnerships can help South Africa to decisively respond to the impact of the global pandemic.”
The pandemic had worsened global fiscal uncertainty and would delay the recovery of the local economy from the current recessionary conditions. Businesses would therefore require assistance beyond the lockdown, he said. – Annelie Coleman