DA calls on Treasury to make public announcement on relaxing banks’ stringent R200 billion Covid-19 loan scheme criteria

7 July 2020

The government’s R200 billion guaranteed loan scheme for businesses is not working. This loan scheme is a central pillar of government’s R500 billion economic support package. If the loan scheme does not work, thousands of businesses will go under unnecessarily. This problem requires urgent attention, but there is little evidence of urgency from the National Treasury.

The Democratic Alliance (DA) calls on Minister of Finance Tito Mboweni to make public what steps he has taken, in co-operation with the Reserve Bank, to relax the stringent vetting criteria banks apply on the R200 billion Covid-19 loan scheme applications.

The Banking Association of South Africa (Basa) has revealed that banks have only disbursed just over 5% (R10,6 billion) of the loan scheme funds since the scheme was launched. Banks have received 33 965 applications, of which 37% (12 660) were rejected either for not meeting the bank eligibility criteria or the eligibility criteria set out by government.

Last month, the DA called on Treasury and major banks to give urgent attention to the slow roll out of the loan scheme, and to make design changes that would allow funds to flow faster.

We were encouraged that Minister Mboweni addresses these concerns in his Emergency Budget speech, saying "We are also finalising amendments to the repayment holiday and turnover limit, and relaxing terms and conditions to support lending.”

But since his speech two weeks ago, nothing has been announced. And lending under the scheme is not speeding up.

The dismal approval rate is an indication that Treasury and the SARB are not paying adequate attention to finding solutions to address the poor uptake rate.

The DA has proposed that normal vetting requirements should not apply at this time. Small businesses face a unique crisis which requires flexibility from banks in their loan risk assessments. This is especially so given that the state is guaranteeing 96% of potential loan losses.

Treasury should be at the forefront of helping small businesses to access much-needed finance. And should not be complicit in sending tens of thousands of South Africans into unemployment.

If the eligibility criteria are not fixed urgently, the programme will fail and tens of thousands of businesses will not survive post-lockdown.

Issued by Geordin Hill-Lewis,DA Shadow Minister of Finance, 7 July 2020