The National Treasury has announced that the Bounce Back Support Scheme for businesses has now come into effect.
President Cyril Ramaphosa and Finance Minister Enoch Godongwana announced the Scheme in February in their respective State of the Nation Address and Budget speech.
In a statement on Tuesday (26 April), Treasury said the Scheme’s purpose is to “provide additional funding to qualifying businesses in order to grow the South African economy and to facilitate job creation.”
“The Scheme is expected to facilitate the recovery and bounce back of businesses beyond the COVID-19 pandemic lockdowns. The Scheme will also help those businesses recovering from the July 2021 civil unrest in KwaZulu-Natal and Gauteng, as well as the current ongoing flood related disaster,” it added.
The new finance mechanism follows the R200 billion Loan Guarantee Scheme announced in 2020, which is widely thought to have failed to extend adequate assistance to businesses. In March last year, Ramaphosa blamed commercial banks for its failure.
In an update in June 2020, the Business Association of South Africa (BASA) said of the R200 billion that could have been issued as loans guaranteed by the government, banks had only approved R18.39 billion.
Treasury said the new Scheme “benefits from lessons learnt from the 2020 Loan Guarantee Scheme to provide for greater take-up, including by Development Finance Institutions (DFIs) and non-bank Small and Medium Enterprise (SME) finance providers.”
How the Bounce Back Support Scheme is structured
The Scheme comprises a loan guarantee mechanism of R15 billion and a smaller equity-linked scheme which will be facilitated by National Treasury and DFIs. The latter will be introduced later this year “as a complementary tool of R5 billion.”
“The Bounce Back Support Scheme loans are to be granted at a preferential capped rate (repo plus 6.5%). Government and lenders (participating banks, DFIs and non-bank SME finance providers) are sharing the risk of non-repayment of these loans with government taking the first 20.5% of losses,” Treasury explained.
“Businesses will be required to repay the loan over a period of up to five years after any deferred interest period agreed to by the lenders. Loans can have rescheduling options at the discretion of the lenders (pay as you grow), for up to a period of ten years from the first draw down in the event of businesses being initially unable to pay any repayment due.”
In a separate FAQs document, Treasury outlined the eligibility criteria. To qualify for a loan under the Scheme, businesses need to:
- Have a relationship, either through lending or transactional banking, with a participating bank;
- Meet the participating bank’s specific requirements;
- Be registered with the Companies and Intellectual Property Commission (CIPC) or be registered for Value Added Tax with the South African Revenue Service (SARS); and
- Have a maximum annual turnover of R100 million.
Businesses will access the Scheme through participating banks, DFIs or non-bank SME finance providers.
“The maximum loan amount will be set at R10 million per businesses (and a minimum loan amount of R10,000). In the case of small and medium enterprises, the turnover cap is a maximum turnover of R100 million with a maximum loan amount of R10 million whilst for non-bank lenders, loans may be made for a maximum amount of R100 million per non-bank lender subject to the approval of the lender,” Treasury explained.