COSATU welcomes the announcement of a new Loan Guarantee Scheme but is disappointed about the drastic cut in funding for it

29 April 2022

The Congress of South African Trade Unions (COSATU) welcomes the announcement of the commencement of the successor to the Loan Guarantee Scheme, the Bounce Back Scheme.  We hope that the R15 billion allocated to it and R5 billion for a business equity scheme to be announced later this year will help thousands of companies battered by the economic recession, Covid-19, the 2021 violence in KwaZulu-Natal and Gauteng and the recent floods in KZN and surrounding areas to rebuild their companies, save and create jobs and ensure their sustainability.  Whilst COSATU is disappointed that it has taken government 18 months to announce these schemes, any bit of a relief for an economy on its knees and workers struggling to find jobs with an all time high unemployment rate of 46% must be welcome. 

 COSATU hopes that Treasury will actively monitor and where needed, intervene, to ensure the successful implementation of this badly needed relief for the economy.  We cannot afford for it to be suffocated by overtly stringent lending criteria and absent advertising as happened when the banks went unchecked with the Loan Guarantee Scheme.

 COSATU welcomes the provisions of the Scheme that seek to make it more affordable for businesses by linking the interest rate to the repo rate and allowing more flexibility for how the funds may be used and less stringent application requirements.  It will be critical that the SA Reserve Bank play its role and avoid its tempatation to raise the repo rate with undue haste.  COSATU urges companies to consider applying for it.

 Treasury, the banks and lending partners need to publicise the scheme to ensure businesses are aware of it and don’t simply sign up for far more expensive loans.  Government needs to consider converting some of these loans into grants in exchange for companies creating and sustaining new jobs.

 Whilst COSATU welcomes the Scheme, the Federation is shocked that Treasury has reduced the funding allocated for it from the R35 billion announced in the February Budget Speech by 47% to R20 billion.  We hope this is an issue of poor communications by government and that this will be corrected or clarified.  We cannot afford to be cutting expenditure that can be used to stimulate an economy when it is in its deepest recession in living memory and nearly 1 out of 2 workers and 3 out of 4 youth are unemployed.  If government wants to cut expenditure, then it should start with the billions lost to corruption, wastage and bling, not programmes that can help save and create badly needed jobs.

Issued by Matthew Parks, Parliamentary Coordinator, COSATU, 29 April 2022