South Africa Looks to Loosen $11.6 Loan Guarantee Program
South Africa Looks to Loosen $11.6 Loan Guarantee Program
South African banks, the central bank and National Treasury are in talks about making changes to a 200 billion-rand ($11.6 billion) loan-guarantee program after few companies made use of the facility because of too onerous terms.
Loans worth 7 billion rand have been approved to about 4,800 small businesses, while another 14,100 applications are being assessed, Bongiwe Kunene, the managing director of the Banking Association South Africa, said on a conference call on Thursday.
“We are honestly looking at everything,” she said. “We need to be more flexible as banks.”
A late start to the program meant some firms had already found other solutions, while an uncertain outlook made it too risky for business owners who were asked to provide personal surety. The scheme could be extended to include non-bank credit providers.
Lenders are in discussions with authorities on relief efforts to help customers cope with the fallout of the coronavirus pandemic, while considering the safety of the financial-services industry, Kunene said. Banks have provided more than 28 billion rand in cash-flow relief by June 6 through measures such as payment holidays, some of which expire at the end of this month, she said.
The talks come as the Banking Association predicts earnings for this year in the industry will drop by 20%. Should non-performing loans increase to 10%, this could wipe out capital buffers so banks have been provisioning for these, Kunene said.
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