South African Micro, Small, and Medium Enterprises (MSMEs) will have five years to repay loans taken for coronavirus mitigation under a new government scheme. In this case, companies will not have to pay anything back to the banks for the first three months and will then have five years to pay off the loan and interest.
Treasury was releasing the details of a plan announced by President Ramaphosa in April to rescue distressed businesses. The R500-billion ($27 billion) stimulus plan included R200 billion for companies with a turnover of less than R300-million ($16.5 million) a year to help pay salaries, thereby supporting 700,000 firms and more than 3 million employees. Moreover, the loans will meet short term financial, contractual obligations, rent, and maintenance.
The activation of the loan guarantee scheme follows the finalization of legal details by the National Treasury, the South African Reserve Bank, and the Banking Association South Africa. Participating banks include Absa, First National Bank, Investec, Mercantile Bank, Nedbank, and Standard Bank.
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The Treasury also gave a breakdown of the more than R5 billion in support to municipalities to assist them in responding to the COVID-19 pandemic in the 2019/20 municipal financial year.
National Treasury has granted approvals for reallocations funds in line with section 20(6) of the Division of Revenue Act, 2019, including:
- R2.4 billion in Urban Settlements Development Grant allocations to metropolitan municipalities. These funds will be used for providing water and sanitation, mainly in under-serviced informal settlements, and to cover the increased costs of more frequent waste management and other services.
- R1.5 billion in Municipal Infrastructure Grant allocations can be reallocated for the provision of water and sanitation, including where urgent maintenance is needed to restore the functionality of water infrastructure.
- R970 million in Public Transport Network Grant allocations may be reallocated, mainly for sanitization of public transport facilities.
- R306 million in the indirect Regional Bulk Infrastructure Grant was reallocated at the end of the 2019/20 national financial year and transferred to Rand Water to fund the roll-out of water tanks to supply communities without reliable access to water services.
- R151 million has been approved for release from the Municipal Disaster Relief Grant to support non-metropolitan municipalities with the costs of sanitization, and increased provision of other municipal services.
The Treasury revealed that it would table a new budget on June 24 to ratify plans for a 500 billion rands ($27 billion) stimulus package aimed at easing the economic impact of the coronavirus outbreak.
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