Only R25bn of R200bn used to rescue struggling businesses: Ramaphosa

The current criteria used by banks to assess loan applications from companies battered by Covid-19 is too prohibitive, President Cyril Ramaphosa said on Wednesday evening. File photo.
The current criteria used by banks to assess loan applications from companies battered by Covid-19 is too prohibitive, President Cyril Ramaphosa said on Wednesday evening. File photo.
Image: Sunday Times/Esa Alexander

President Cyril Ramaphosa finds it "scandalous" that no more than R25bn of the government's R200bn coronavirus loan scheme has been used to rescue struggling businesses in the last six months.

In a digital media engagement with news editors and senior journalists on Wednesday evening, he said the current criteria used by banks to assess loan applications from companies battered by Covid-19 was too prohibitive and he wanted it changed.

The R200bn Covid-19 loan guarantee scheme, in which banks would grant financial assistance to companies whose profits have been affected by the lockdown, was announced by Ramaphosa in March as part of measures to mitigate the economic impact of the pandemic.

Speaking to journalists following the release of figures that the country's economy had shrunk by 16.4% in the second quarter of this year, Ramaphosa said it was "frustrating" that banks had stuck to their traditional way of assessing loan applications, seemingly not taking into account the impact of Covid-19.

"My frustration is that the conditions and the criteria that is being applied to these loans is just prohibitive, many businesses are being turned away and they are being turned away because they don't meet this criteria or that criteria set by this bank, set by the central bank and all that, and I'm saying the criteria needs to be aligned with the moment that we're in," he said.

"It needs to be aligned with Covid-19. Covid has devastated many businesses and we need to lower those thresholds and make sure that businesses do succeed. Of course we're not saying just give money away willy-nilly; we're saying there's quite a number of businesses that need to be looked at in a progressive way, not in a conservative way in a way that banks typically look at applicants for loans.

"I would like to see the criteria reformed or restructured so that more and more businesses apply. I think it's scandalous that only R18bn to R25bn of the R200bn, almost six months later, has been allocated.

"The government is prepared to stand behind this money. We're not saying you should throw away money, but we're saying support the businesses."

Ramaphosa said he would  in the next "two to three" weeks be releasing an economic recovery plan in response to devastating economic numbers released this week.

He said the GDP numbers did not shock him, as he had warned at the start of the national lockdown that the pandemic would severely damage the economy.

He said the government now needed to improve the pace at which it was implementing its policies on the economy, including public infrastructure spending.

Ramaphosa, who is due to address the nation next week, said the national coronavirus command council (NCCC) was considering the easing of lockdown regulations to open more sectors of the economy.

"As the NCCC we're having to evaluate a number of proposals that have been put to us by a number of sectors of society," he said, adding that the proposals came from the hospitality, tourism, sport and entertainment industries, among others.

"We'll be able to give consideration to all these proposals ... so watch this space next week [for] where we end up as a nation, as far as this is concerned."

On Tuesday, health minister Zweli Mkhize said the country was now ready to move to alert level 1 of the national lockdown. He said the country had passed the peak in Covid-19 infections.

Turning to the issue of corruption, Ramaphosa said the country and the governing ANC needed to have a conversation about whether politicians should be allowed to continue drawing their salaries while on suspension over corruption allegations and other forms of wrongdoing.

TimesLIVE


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