CALL FOR E1BN LOAN GUARANTEE SCHEME

MBABANE – The Eswatini National Treasury and the Central Bank of Eswatini (CBE) should be working with commercial banks in the Kingdom to provide government-guaranteed loans to SMMEs.

 The call to support the small, micro and medium-sized enterprises (SMMEs) that may not be able to meet their financial obligations during the lockdown and when the economy reopens has been made by the Federation of Eswatini Business Community (FESBC).

FESBC Vice President Hezekiel Mabuza said loan guarantee arrangement should make E1billion in new loans available, of which E200 million should be made available in the first phase. 
“SMMEs and businesses with an annual turnover of less than E100 million, which are in good standing with their commercial banks, should be eligible for bank loans.

borrowed

“Funds borrowed by SMME can be used for operational expenses including salaries, rent and lease agreements, and supplier contracts. Loans should cover up to three months of operational costs and will be drawn down monthly,” said Mabuza. Mabuza said banks should not be obliged to extend COVID-19 loans, and those that do should use their normal risk-evaluation and credit-application processes. “SMME business owners may be required to sign surety for the loan. Each SMME and business may accept only one COVID-19 loan.

“Loans should be offered at a single agreed lending rate, which tracks the repo rate, by all participating banks.”
FESBC further recommended a six-month repayment holiday commencing from the first draw down.
“Interest and capital repayments should start after six months, and businesses should have a maximum of 60 months to repay the loans,” he said.

stressed

Mabuza stressed that as local and state governments issued shelter-in-place orders, asking residents to remain home for all but essential errands, businesses — especially micro and small local businesses — across the Kingdom were facing difficult decisions.  “These institutions are crucial to our nation’s economy, employing about 47.5 per cent of the total private sector workforce in our Kingdom.

“CEOs, and owners of SMMEs across the kingdom are facing these measures. Bigger SMMEs usually support other smaller businesses and organisations by providing capital, loans, supplies, labour, technology, and raw materials for manufacturing, production and services.

Suddenly — but understandably — demand for these services has dropped. However, SMMEs and businesses are not alone as the public sector is also feeling the pinch,” he said.  At FESBC Mabuza stressed that they were advocating and supporting many SMMEs and private businesses across the Kingdom.

“In the past weeks we’ve watched our SMMEs and small businesses that make up the franchise industry struggle with dwindling sales due to this unforeseen economic crisis,” he highlighted. Meanwhile, South Africa came up with a R200 billion loan guarantee scheme last month that will operate from May 12, 2020.

The loan guarantee scheme is an initiative to provide loans, guaranteed by government, to businesses with an annual turnover of less than R300 million to meet some of their operational expenses.

agreements

Funds borrowed through this scheme can be used for operational expenses such as salaries, rent and lease agreements, contracts with suppliers, and so on.
The initial set of participating banks (Absa, First National Bank, Investec, Mercantile Bank, Nedbank and Standard Bank) is ready to accept loan applications from distressed businesses which bank with them.

 South Africa’s government and commercial banks are sharing the risks of these loans. Initially, that country’s National Treasury has provided a guarantee of R100 billion to this scheme, with the option to increase the guarantee to R200 billion if necessary and if the scheme is deemed successful.

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