SA banks provide R45.5bn financial lifeline to ease the pain of lockdown

10 August 2020 - 13:57 By TimesLIVE
Payment breaks worth billions have helped businesses stay afloat during the financially crippling lockdown.
Payment breaks worth billions have helped businesses stay afloat during the financially crippling lockdown.
Image: 123RF/Aleksandr Davydov

South African banks have provided a cumulative R45.5bn in financial relief and loan guarantees to businesses and individuals left financially distressed by the coronavirus pandemic and national lockdown up until August 1.

The Banking Association South Africa said in a statement on Monday that relief of R19.3bn had been offered to individuals and R12.9bn to commercial and small and medium enterprises.

“Separately, R13.26 billion in loans were extended by banks under the Covid-19 loan guarantee scheme,” said the association.

“Since March 2020, banks offered payment breaks, worth a combined R32.30bn, to individuals and small, medium and commercial businesses to help keep them afloat through the lockdown. Over 84% of individuals and 95% of businesses who requested help, received assistance.

“The R32.30bn is the cumulative amount of monthly instalments for assets and loans, which have been deferred. The combined value of the actual assets is R537bn. This includes R229.27bn for home loans, R52.06bn in business mortgages and R47.52bn in asset-based finance for companies.

The association said cash flow relief for eligible individuals and businesses was critical to the preservation of quality of life, jobs, businesses and a functioning economy. Additional relief was provided by interest rates cuts by the SA Reserve Bank.

These “payment breaks” were not debt “write-offs” and interest and fees on credit agreements would continue to accumulate, the association added.

“The loan guarantee scheme provides loans, substantially guaranteed by government, through participating commercial banks to eligible businesses, to help them survive until ‘new normal’ economic activity can resume.”

The Reserve Bank and National Treasury agreed with commercial banks to guaranteed R100bn for loans under this scheme – which may in future be extended to guarantee up to R200bn.

“As at August 1 2020, participating banks had received 39,677 applications for the guarantee scheme. Of these, 23% have been approved by banks and taken-up by businesses, while 36% are being assessed. Ten percent were rejected because they did not meet the eligibility criteria for the loan, as set out by the Treasury and the [Reserve Bank] and 28% were declined because they did not meet banks’ risk criteria,” said the association.

The initial take-up of the scheme was slower than anticipated and, since August 1, the terms and conditions were revised, making it easier for small businesses to access loans to cover operating expenses such as salaries and rent. Key changes to scheme criteria include:

• Business restart loans will be available to those able to start operating as economic activity resumes.

• Bank credit assessments and loan approvals will be more discretionary and less restrictive, though banks will still use reasonable lending practices.

• The test for businesses being in "good standing" - having a good record of paying their bills - has been made easier.

Full details of the changes to the loan scheme are on the Reserve Bank, Treasury and banking association websites.