Farmer's Weekly (South Africa)

‘Agri needs surpass R200 million loan guarantee scheme’

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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

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