Update: Business & Economic Recovery

Publication Date: 26/07/2021

Business and Economic Recovery Update

The recent violence and unrest caused extensive damage to the infrastructure of banks in KwaZulu-Natal and parts of Gauteng. The work of rebuilding and repair will take time, but with some branches and ATMs now back in service, South African banks are turning their attention to supporting customers whose businesses were disrupted. Banks will remain a part of those communities where their customers live and work.

The latest reports indicate that 1 223 automatic teller machines (ATMs) and 269 bank branches were destroyed in the unrest. As safety and security is restored in affected areas, ATMs are being rebuilt and replaced and financial networks repaired. Already, ATMs and branches in many places have been repaired and restored to full service. Banks are also encouraging their customers to use digital banking platforms, which remain resilient and continued to facilitate transactions throughout the unrest.

Despite the destruction of cashpoints, there is currently no shortage of cash in the affected areas. Bank emergency response teams are working around the clock to ensure that social grants and salaries will be paid as usual at the end of this month. To assist social grant recipients who live in areas where ATMs and branches have been destroyed, customers will be able to use any ATM, including those not operated by their own bank, without incurring additional charges, from 01 August 2021 to 30 September 2021.

In the coming weeks, banks will look to offer financial relief to affected clients with measures that may include bespoke arrangements and targeted payment relief. Enterprises that have been left without stock, without premises and without business, cannot be expected to meet their financial commitments as usual. However, it is also important to note that financial relief cannot amount to debt ‘write-offs. Banks use their customers’ savings to extend loans and have a responsibility to ensure that they are not exposed to undue risk of not being repaid.

Customers, who were in good standing before the unrest should contact their banks as soon as possible to see how they may best be assisted.

Banks are exploring several relief measures intended to give their customers time and space to rebuild and restock businesses and enterprises. One of the measures under consideration is the provision of bridging finance while insurance claims are processed by the South African Special Risk Insurance Association (SASRIA), which is responsible for insuring against social and political unrest. Banks are working with SASRIA and the short-term insurance industry to find ways to simplify and shorten the claims process. Banks will take into account the documentary evidence produced by claimants when considering the provision of bridging finance facilities. Government’s public and unequivocal support for SASRIA is vital to the success of these measures.

We encourage, and will assist, those companies and entrepreneurs who receive insurance pay-outs, to reinvest in opening their businesses and to continue to serve their communities and retain jobs. However, restoring business confidence requires unequivocal explanations for the cause of the violence and a credible assurance that it will not recur.

It is clear that some businesses hit by the unrest, especially small, medium and informal family enterprises that may not have been insured, will need government support. One of the key lessons from the Covid-19 Loan Guarantee Scheme, set-up to help small businesses through the pandemic, was that entrepreneurs are unwilling to take on additional debt, which they may not be able to repay, particularly in times of great uncertainty. These businesses need alternative relief measures, ranging from the provision of targeted grants to the suspension of rates and taxes to help reduce business expenses.

Because they understand their clients’ needs, banks are well-placed to help those in financial distress. Assisting customers who experience financial difficulties is part of the normal business of banking. Between April 2020 to February 2021, banks provided R293 billion in Covid-19 financial relief to their customers.

However, the Covid-19 crisis also served to highlight that financial solutions alone are not enough to assist businesses in a weak economic environment. It is far more critical that businesses have access to efficient public infrastructure like power and transport, that policies are clear and not subject to arbitrary change, and that excessive red-tape hampering entrepreneurs falls away. Attractive, long-term incentives are necessary to secure investment in commercially sustainable economic and social infrastructure.

Above all, businesses need confidence in continuing social stability and rule of law.

It is our fervent hope that recent events will galvanise government action on these imperatives as we continue the collective work of rebuilding business and restoring communities disrupted by the recent unrest. BASA and its members stand ready to do our part.