As at August 9, banks in South Africa have provided voluntary relief on loans with a book value at risk of R537-billion, in efforts to support the South African economy during Covid-19.

The Banking Association of South Africa (Basa), which represents all the registered banks and a board comprising bank CEOs, on August 19 updated Finance Minister Tito Mboweni about what the banking sector will further do to assist customers during Level 2 lockdown.

Basa says the voluntary relief efforts by the banks were supported by regulatory changes made by the prudential authority of the South African Reserve Bank.  

Additionally, Basa’s members, as at August 1, had lent out R14-billion of an initial R100-billion as part of a loan guarantee scheme. This amount has benefited nearly 10 000 businesses, with another 15 000 applications being processed by banks.

Basa notes that demand for credit is currently particularly low, largely owing to the earlier voluntary assistance provided by the banks when the State of National Disaster was declared.

“Firms are reluctant to take on additional debt. However, the recently announced move to Level 2 would support the reopening of significant parts of the economy. With firms adjusting to the next stage of the Covid-19 pandemic, it is hoped that the economic recovery will strengthen and the demand for credit will improve,” Basa says.

With this in mind, changes have been made to the design of the loan guarantee scheme. These include a business restart loan offering and changes to credit assessment criteria.

Mboweni commented that the banking industry’s ongoing openness to discuss design improvements was appreciated and commended the banks on their response to changing circumstances.

Basa has emphasised the need for Covid-19 economic relief measures to be complemented by structural reforms for South Africa, as proposed by Mboweni earlier this year, to turn a corner in South Africa’s economic recovery.

Ongoing engagement between Basa and the National Treasury will inform further design changes that may be required to ensure that more small and medium-sized enterprises use the schemes offered by banks to support their recovery.