The South African government is launching a new loan scheme that will run for three years and cost R721 billion. This is aimed at supporting South African businesses who are facing distress caused by the Covid-19 pandemic.
The presidency said in a statement on Monday,14 March, that the scheme will officially launch on 3 April and will allow small businesses to apply to banks and other lenders for ‘bounce-back’ loans.
South Africa’s Finance Minister Enoch Godongwana mentioned it in his February Budget speech and added that the scheme will use two mechanisms that will be introduced sequentially.
Firstly, small business loan guarantees of R15 billion will be facilitated through participating banks and development finance institutions, he said.
He added that, “This allows access for qualifying non-bank small and medium loan providers. The government will partner with loan providers by underwriting the first 20% of losses for banks and other eligible small and medium loan providers.
Also, “The eligibility criteria, including the requirement for collateral, has been loosened. This mechanism will be launched and operational next month.”
Secondly, by April this year, the government intends to introduce a business equity-linked loan guarantee support mechanism.
Godongwana said that, “We intend to bring the total support package through the bounce-back scheme to R20 billion. The equity support mechanism of this scheme will be facilitated through DFIs (development finance institutions). It will also be available to qualifying non-bank small and medium finance providers.”