The announcement by Standard Bank of a 3 month payment holiday on all up-to-date business loans is very welcome. The DA calls on all other banks to match this relief intervention as soon as possible.
The DA has called for a loan forbearance programme since the national disaster was declared, and we are pleased that this request has been heeded. We now need to see this rolled out by all other banks and loan-making institutions.
This business loan forbearance, if it is matched by all banks, will give much needed relief to struggling businesses and families. It will give our economy the breathing room it needs to survive the next few months.
However, it is concerning that the government has not co-ordinated a nation-wide loan forbearance programme proactively, and has instead left it up to individual banks to make these announcements. This does not inspire confidence that the government has a firm grip on the economic disaster we face, or that they have any plan to help get our economy through this crisis.
The uncomfortable truth is that the government is unable to decisively intervene to save the economy now, because it has no money, and no ability to raise more debt, following a decade of economic mismanagement.
But they can and should still play a leadership role in co-ordinating an economic response. We reiterate our call for the government to present a comprehensive Economic Support Package, which should include the measures the DA has called for this past week:
- Free up funds for disaster management:
At this time, it is unthinkable that redundant SOEs like SAA will receive a bailout of R16.4 billion, as is proposed in the current budget, while the health budget is to be cut by R3.9 billion.
This SAA bailout should be cancelled immediately and the budget amended to allocate this money to disaster relief, and to provide for the essential equipment that our health officials will surely need in the coming weeks.
- Loan forbearance:
For the economic survival of small businesses, we propose a nation-wide four month payment holiday on loans for small and medium businesses, in particular property loans, business loans and vehicle loans. Now that this proposal has been announced by Standard Bank, we call on other banks to match it.
- Rental forbearance:
Most small businesses operate from rented premises. Landlords can often not afford to relax these rental payments, because the properties themselves are bonded. If a loan payment holiday programme is enacted, then rental payments can also be paused for four months to help businesses survive.
There are of course some property owners who rely on the income from their properties, even if they are not bonded. In these cases, a pause in rental payments, or a reduction in rental payments, would need to be negotiated on a case by case basis. Even so, it would still help for the government to make a statement calling on owners to demonstrate forbearance wherever possible.
- Raise in VAT threshold, and pause in UIF and Worker’s Compensation Fund payments:
The Department of Labour has announced a pause on payments for UIF, which we welcome, but this must be extended to include payments for the Worker’s Compensation Fund by small businesses for four months, without affecting workers’ cover under the fund. Many businesses pay tens of thousands of rands to these funds, and this money would be valuable cash flow support to those businesses during this time. Payments could be recouped when the economy rebounds.
The Compensation Fund currently has R50 billion in assets, and pays out roughly R4.5 billion in claims each year. Our assessment is that The Fund could absorb a single payment deferment this year.
Now is also the time to raise the VAT threshold for small businesses, from R1 million to R2 million. This would give immediate relief to small businesses.