Bongiwe Kunene. Picture: Supplied
Bongiwe Kunene. Picture: Supplied

It would be hard to describe the results of the government-backed loan guarantee scheme as anything but an abject failure. After all, only R13.6bn out of R200bn available has been disbursed to local businesses under the loan plan designed to help the private sector through the Covid crisis. We asked Banking Association SA (Basa) MD Bongiwe Kunene why the results have so far been so dismal.

BK: I’d say that the low disbursements are a function of many issues, the first [of these] is the behaviour of business. What drives businesses when looking for loans is confidence, and that there’s demand for the goods and services they offer.

When the economy is picking up or [going] at a steady pace, businesses might want to take loans. But in this instance the whole country, economically speaking, is not doing great and this is not just because of the pandemic. So we now have pandemic-fuelled negative economic sentiment and there are very few businesses that are going to want to take loans under these conditions.

So do you think it’s unfair to put the lack of take-up of this scheme at the banks’ door?

BK: I would say let’s assess the facts. Because if this is about banks, I would say to you look at what the banks have been doing, starting in March. Remember, the scheme came into being on May 12 and before that, banks started giving payment deferrals of their own accord. The announcements made by Basa were very clear: any client of any SA bank who had monthly instalments or financial obligations was given three months to either pay less than what was due or not pay at all, or a combination of the two. As a result of that, banks were able to give out deferrals up to R19.34bn to individuals and R12.96bn to businesses. So this has nothing to do with the government. The government’s efforts started late and had conditions which were narrow; I wouldn’t say they were too strict, just narrow.

We know the loan guarantee scheme came too late but it doesn’t seem like a bad deal for the banks: they absorb the risk of the first 6% of the loan, and the Reserve Bank is liable for 94% of any losses. So, is profit still too much at the forefront of banks’ minds?

BK: I would say look again at the conditions. First, there is no intention for the R100bn [of the R200bn scheme] to make any profit, and the banks accepted that as a condition when they were negotiating with the Bank and the National Treasury.

For some businesses the most logical thing to do at this point is to close the business and stop the debt. It becomes a huge risk to remain operational when the level of uncertainty is so high.

Do you think it’s reasonable to have loan criteria, for example requiring that company directors or owners stand personal surety if the business defaults? That seems quite unreasonable.

BK: I’m not able to comment on the terms and conditions for any particular loan, but I can tell you that in the first version of the loan guarantee scheme owners, including shareholders, couldn’t be paid from that money... now that has changed completely.

One gets the impression that banks are being too risk-averse: that they’re not prepared to take a chance on businesses, be they small, medium or large.

BK: All the indications we have from the association’s side is that the banks have gone a very long way towards being very accommodative and with the second version of the loan guarantee scheme, they’ve opened up even further. Initially, they required audited financial statements from companies applying for loans but now they’re saying if you’re a primary client, whatever statements you have don’t have to be audited ... so that is one measure of relaxation. Also, initially you had to be in good standing as of February 2020, but now they’ve gone back and moved that to December 2019. There is a lot of flexibility that has been brought up. I think everything that we are discussing must be looked at in the context of a functioning economy; in our case, we have an economy that has shed jobs and unemployment has shot up significantly. So for both business owners and the banks, this may not be the time to take on debt.

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