In response to the Covid-19 pandemic, the government is launching a new New South Africa Covid Loan program aimed at helping South African businesses.
About New South Africa’s COVID Loan
According to a press release issued by the presidency on Monday (14 March), the scheme will officially launch on 3 April and will allow small businesses to apply for ‘bounce-back’ loans from banks and other lenders.
According to Enoch Godongwana, the finance minister will be introducing two mechanisms as part of the scheme. First, small business loan guarantees of R15 billion will be available through participating banks and development finance institutions, he said.
“This will allow non-bank lenders to access the fund. In partnership with loan providers, the government will underwrite the first 20% of losses for small and medium-sized lenders. In partnership with loan providers, the government will underwrite the first 20% of losses for small and medium-sized lenders”.
“Also loosening the eligibility criteria, including the requirement for collateral, will go a long way in easing the application and approval process.” The mechanism will be up and running next month.
Secondly, the government plans to introduce a business equity-linked loan guarantee support mechanism by April.
We intend to increase the total support package to R20 billion through the bounce-back scheme. DFIs (development finance institutions) will facilitate this scheme’s equity support mechanism. “Qualifying non-bank small and medium finance providers will also have access to the fund,” Godongwana said.
A Budget Review document accompanying the speech reveals that government will, over the next three years, spend R721 billion. This is to promote faster and sustained inclusive economic growth to address unemployment, poverty and inequality plaguing the country.