Payment holiday increased to six months as turnover cap is replaced and sole traders included
South Africa has doubled to six months the term of loans to small and medium-sized businesses to help them survive the Covid-19 recession and made other changes to make the credit easier to access, the South African National Treasury said on 26 July.
President Cyril Ramaphosa announced the SAR200bn ($12bn) loan scheme in April to help businesses, as part of stimulus measures to lessen the pandemic impact on South Africa’s already shrinking economy.
The Covid-19 Loan Guarantee Scheme provides loans, substantially guaranteed by government but with some of the risk shared by banks, to eligible businesses to assist them during the Covid-19 pandemic. Funds borrowed from this scheme, through their banks, can be used for operational expenses, such as salaries, rent and lease agreements and contracts with suppliers.
The loans are granted at a preferential rate (prime) and repayment may be deferred for a maximum of one year after taking out the loan. Businesses will then be required to repay the loan over five years.
Many of South Africa’s small and medium-sized firms were thrown into disarray when the government introduced a lockdown at the end of March to try to contain the spread of the novel coronavirus that causes Covid-19.
They lost much of their revenue but still faced fixed costs, and many have struggled to recover even as the lockdown lifted.
The changes to the scheme include making “bank credit assessments and loan approvals more discretionary and less restrictive,” the South African National Treasury said in a statement.
They extend the draw-down period and the interest and capital repayment holiday to six from three months and replace the SAR300m rand turnover cap with a maximum loan amount of SAR100m.
Sole proprietorships are now explicitly included. For sole proprietorships and small companies, salary-like payments to the owners (drawings) are included in the use of proceeds.
More details on the scheme revisions can be found here