S.Africa: Massive $13 Billion Virus Stimulus is not working good enough: Businesses hitting the wall…
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A 200 billion rand ($13 billion) loan program, one of the linchpins of President Cyril Ramaphosa’s plans to shore up a South African economy devastated by the coronavirus pandemic, may not even reach 10% of its target.
Banks have distributed 17.8 billion rand since the initiative started in May through to Jan. 16, the Banking Association of South Africa said in a statement on Wednesday. At the current rate, only 18.9 billion rand will be allocated under the plan, it said.
Ramaphosa’s administration last year unveiled a 500 billion-rand support package by reprioritizing spending from existing budgets, setting aside 100 billion rand to protect and create jobs, and 50 billion rand for welfare. Banks were roped in to distribute loans guaranteed by the government to help small- to medium-sized businesses navigate through the crisis, starting with 100 billion rand of disbursements before doubling up.
“Demand for the scheme remains significantly below the original expectations,” the banking association, which includes lenders such as Standard Bank Group Ltd. and Nedbank Group Ltd., said. “Participating banks expect applications for the scheme to slow-down further in the coming months.”
By the time the program was ready to be rolled out, businesses were already reeling from one of the world’s strictest lockdowns, instituted in March, and had made arrangements with their lenders.
Financial Stress
South Africa is among a few outliers where bankcruptcies increased in 2020
With the country going through different levels of restrictions since then to contain the Covid-19 outbreak — from a ban on alcohol sales to curfews and keeping people off beaches — many companies and consumers are still struggling to cope. Company liquidations last year soared to the highest level since 2012, according to government data.
Debt Shy
“Business owners remain reluctant to incur more debt, due to the challenges presented by inconsistent policy and regulation, uncertain business conditions and a weak economic outlook,” the association said. The slow pace of economic reform, unreliable electricity supply, lack of inclusive growth, and weak consumer and business confidence is hindering the need for credit.
Many companies also fail to qualify under the initiative’s criteria, even after some of the rules were relaxed to drive demand. The nation’s largest cinema chain last month filed for business rescue, a form of bankruptcy protection. Playtex, a 60-year-old underwear maker, went into liquidation last month, costing more than 700 jobs, according to Johannesburg-based news website IOL.
As of January, banks had received 48,366 loan applications of which 27% were approved and taken up, 46% were rejected, and 5% are still being assessed. By Nov. 21, banks had approved 17.49 billion rand in loans and 47,159 applications.
“The Covid-19 Loan Guarantee Scheme on its own cannot address all of the financial and business challenges facing small enterprises, many of which pre-date the pandemic,” the banking body said. “Government will have to implement other business and financial support programs.”
2008: S.Africa: Oprah Winfrey, Racist diva of double standards
Ms Winfrey openly and shamelessly admitted that her new school was not only racist, but also sexist. She opened an elite school only for Black Girls in SA.
