Uptake of S.Africa's COVID loan scheme likely to stay minimal - banking association


Banking association says demand for COVID loans low

Says payouts likely to hit $1.5 bln by Jan

Scheme hefty chunk of S.Africa's virus stimulus package

Adds details, quote

JOHANNESBURG, Aug 28 (Reuters) - The Banking Association of South Africa (BASA) said on Friday disbursements of the government-backed coronavirus loan scheme for small businesses are likely to reach just 24.4 billion rand ($1.45 billion) by January amid low demand.

President Cyril Ramaphosa announced the scheme, worth up to 200 billion rand, in April under stimulus measures to lessen the pandemic's impact on South Africa's already shrinking economy. It had to be tweaked in July due to low take-up.

But BASA said on Friday demand for the scheme is expected to remain at only a small fraction of the amount on offer and taper off, with companies averse to taking on more debt during the crisis and opting for other measures to manage its impact.

"We are finally coming to some conclusions that, tentatively, looking at what we know so far, debt is not the only answer," BASA managing director Bongiwe Kunene told reporters during a presentation.

BASA said that even the "best possible case" for take-up by January was 43.7 billion rand.

The scheme, launched in May, was meant to encourage banks to lend more, on more favourable terms, to businesses whose operations were thrown into disarray by the pandemic.

Ongoing low take-up, despite measures to make it more attractive, will add to concerns that some 40% of a 500 billion rand stimulus package announced by Ramaphosa is not being put to work.

Another factor in low take-up, according to BASA, was that the May launch of the scheme came after substantial relief provided by lenders already in the form of, for example, payment holidays, which also reduced demand.

($1 = 16.8229 rand)

(Reporting by Emma Rumney; Editing by Toby Chopra/Mark Heinrich)

((Emma.Rumney@thomsonreuters.com; +27115952832;))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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