National Treasury offices in Pretoria. Picture: RUSSELL ROBERTS
National Treasury offices in Pretoria. Picture: RUSSELL ROBERTS

Ways to include nonbank funders in the state’s Covid-19 loan guarantee scheme are still under discussion, according to the Treasury and the Black Business Council (BBC).

On Sunday, the Treasury and SA Reserve Bank announced revisions to the scheme aimed at improving its disappointing take up, though the changes did not include the extension of the scheme to nonbank funders of SMEs.

The BBC has been lobbying for this since the scheme was first announced, amid concern that it was not inclusive enough and criticism that the commercial banking industry had a poor track record of lending to small businesses

“We have not yet found a way to include nonbank lenders directly,” the Treasury said. The new design does, however, allow nonbank SME funds to enter indirectly by borrowing from the scheme through the banks, at the prime interest rate, it said.

There are a number of legal and logistical challenges it said, in particular that there is no consistent prudential regulatory framework for nonbank SME funders.

“They are essentially regulated through the National Credit Act, but their legal form differs from lender to lender,” the Treasury said. For instance, some are private equity firms and some are companies, while others are trusts.

Nevertheless, discussions were continuing, it said and included programmes such as the Khula credit guarantee scheme, run through the state’s Small Enterprise Development Agency.

The Covid-19 loan guarantee scheme — one of the most important legs of the state’s R500bn economic stimulus package — has been dogged by low take-up since it was launched in May. Though R200bn has been earmarked for the scheme, the Treasury has provided an initial R100bn guarantee, which will increase if the scheme is successful and there is additional demand.

Thus far R10.6bn has been extended to distressed businesses under the scheme, according to a recent update from the Banking Association SA, while the banking sector at large has extended an estimated R30.6bn in relief to individuals and businesses directly through ordinary banking channels.

“Everything is still on the table,” BBC CEO Kganki Matabane said.

After meeting with the Treasury and central bank, a technical working group had been established that included nonbank funders to look at the various ways to include them in the scheme, he said.

“We are working very closely with them,” he said, adding that “a lot of companies are struggling and are busy closing doors and going under, so the sooner [the work is done] the better.

The amendments announced at the weekend include longer interest and capital repayment holidays and the explicit extension of the scheme to sole proprietor businesses.

Banks have also been given greater discretion in credit assessments and loan approvals. Banks may now use their discretion on the financial information required; for example, accept bank or financial statements when audited statements are not available.

Initially limited to businesses with a turnover of no more than R300m per year, the scheme has now replaced this with a maximum loan amount of R100m instead.

Business restart loans will also now be available to help businesses get back on their feet as the economy starts to reopen.

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