South Africa to launch new Covid loan scheme from April – what you should know

The government is launching a new loan scheme aimed at supporting South African businesses facing distress caused by the Covid-19 pandemic.

In a statement on Monday (14 March), the presidency said the scheme will officially launch on 3 April and will allow small businesses to apply to banks and other lenders for ‘bounce-back’ loans.

The scheme will use two mechanisms that will be introduced sequentially, finance minister Enoch Godongwana said in his February Budget speech.

Firstly, small business loan guarantees of R15 billion will be facilitated through participating banks and development finance institutions, he said.

“This allows access for qualifying non-bank small and medium loan providers. The government will partner with loan providers by underwriting the first 20% of losses for banks and other eligible small and medium loan providers.

“The eligibility criteria, including the requirement for collateral, has been loosened. This mechanism will be launched and operational next month.”

Secondly, by April this year, the government intends to introduce a business equity-linked loan guarantee support mechanism.

“We intend to bring the total support package through the bounce-back scheme to R20 billion. The equity support mechanism of this scheme will be facilitated through DFIs (development finance institutions). It will also be available to qualifying non-bank small and medium finance providers,” Godongwana said.

A Budget Review document accompanying the speech reveals that government will, over the next three years, spend R721 billion to promote faster and sustained inclusive economic growth to address unemployment, poverty and inequality plaguing the country.

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South Africa to launch new Covid loan scheme from April – what you should know