THEBE MABANGA
THE government’s R200 billion Loan Guarantee Scheme, introduced last year to help small businesses to weather the storm of COVID-19 crisis, will be revamped in a bid to help the scheme reach more businesses.
This was announced by President Cyril Ramaphosa during the State of the Nation Address (SONA) in Parliament on Thursday, but may prove too late for businesses that have closed during the pandemic.
The scheme was introduced in May last year and in his speech, Ramaphosa announced that around R18.9 billion in loans have been approved for 13,000 businesses.
This represents less than 10% of the overall amount and the scheme has been criticised.
“Demand for the scheme remains significantly below the original expectations,” the Banking Association said earlier this month.
“Participating banks expect applications for the scheme to slow-down further in the coming months.”
The scheme has been criticised for benefiting companies who would have benefitted during the normal course of business, mostly white owned companies.
Banks argue that by the time the scheme was launched in May, a full month after the national lockdown had been instituted, most businesses had already made arrangements with their lenders.
A few months after it was launched, when uptake was found to be low, the scheme was tweaked and had the revenue threshold of R300 million for qualifying companies removed and the payment moratorium increased from three to six months.
But even that does not appear to have boosted its success.
It is not clear what changes will be introduced now, with banks set to argue that the need for special measures may have passed, as the economy is now reopening.
Ramaphosa said the Finance Minister Tito Mboweni will announce the changes to the scheme, possibly at the unveiling of the budget later this month.
Government and private sector assistance for small businesses during COVID-19 seems to have benefited mostly white businesses.
The Small Business Development Department said last week that 62% of aid it disbursed on its own and through its agencies benefited white-owned businesses.
(SOURCE: INSIDE POLITICS)