South Africa: Treasury Flogs a Dead Loan Guarantee Scheme for Another Three Months

analysis

With R18.16-billion in loans advanced to small and medium-sized businesses as of 27 March 2021, the scheme has failed to reach its 10% loan disbursement target.

The government's loan guarantee scheme of R200-billion, which has failed to meet its target of helping a large number of struggling businesses get through the Covid-19 pandemic, has been extended.

The loan scheme came to an end on 11 April 2021, but the government has extended its operation for three months, the National Treasury announced on Monday, 12 April 2021.

The scheme was introduced in May 2020 by commercial banks, the Treasury, SA Reserve Bank and Banking Association SA as a centrepiece in President Cyril Rampahosa's plan to shore up the economy during the worst recession since the Great Depression.

To launch the scheme, the Treasury said it provided a R100-billion guarantee to the Reserve Bank and, in turn, commercial banks, with an option to extend it to R200-billion - depending on the demand for loans by financially distressed businesses.

Banks would not be taking much lending risk because any loans disbursed under the scheme would be guaranteed by the Reserve Bank and the Treasury, meaning if businesses fail...

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