Financial services firm Absa has secured a $20-million senior loan to contribute to its support plan that is dedicated to financing corporate small and medium-sized enterprises (SMEs) operating in sectors impacted by the Covid-19 crisis, including construction, manufacturing, transport, tourism, wholesale and retail.
The loan was secured from French development finance institution (DFI) Agence Française de Développement Group's private sector financing arm Proparco.
“The agreement further enables Absa to provide financial support to corporate SMEs, a vital component of the local economy, as it recovers from the impact of the Covid-19 pandemic. We are particularly pleased with the agreement, as we view the relationship with Proparco, a significant DFI in Africa, as strategically important,” says Absa group treasurer Parin Gokaldas.
South Africa's SMEs represent more than 98% of all businesses, employ between 50% and 60% of the country's workforce across all sectors and are responsible for a quarter of private sector employment growth, particularly among young people.
Before the Covid-19 crisis, SMEs were already facing difficulties, which have been exacerbated owing to the pandemic, Proparco and Absa point out.
During the Covid-19 crisis, Absa was one of the first banks to announce a comprehensive support plan, named the Covid-19 Payment Relief Plan, for its clients in corporate, wealth, business bank, private bank and retail, including SMEs and individuals.
The plan offered a systematic deferral of payment and was the largest provided by a South African bank.
"[The senior loan] is fully in line with Proparco's strategy to support the financial sector in its response to an unprecedented context of the crisis linked to the Covid-19 pandemic. We are delighted to start this partnership with Absa Bank, a key player with a strong pan-African presence and to be part of a much needed counter-cyclical role," says Proparco Financial Institutions Debt Group Africa and Middle East deputy head Emmanuel Haye.