Weak South African Economy Seen Hindering Demand for Virus Loans

Demand for loans backed by South Africa’s government to help small- and medium-sized companies survive the coronavirus-pandemic fallout will probably drop long before the funds are depleted.

That’s according to Banking Association South Africa Chief Executive Officer Bongiwe Kunene.

“Debt is not the only answer,” she told reporters on a call Friday. “If businesses are in distress, what they are looking at is right-sizing, it’s changing their business models.”

Uptake for loans under the country’s 100 billion-rand ($6-billion) loan-guarantee program has been slow as the country’s recession weakens demand. A late start also meant most businesses had already made other arrangements after the lockdown was implemented at the end of March.

As of Aug. 15, 13.4 billion rand was disbursed through the program, according to data compiled by the industry body. Lenders expect demand to taper off by January, with only about 44 billion rand being accepted by companies in the best-case scenario, Kunene said.

Discussions between the industry association and government have moved from potential changes to the program to rouse interest, to ways the country can improve business confidence, she said.

©2020 Bloomberg L.P.

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