Update: Business & Economic Recovery

Publication Date: 29/07/2021

Banks are ready and able to assist with the payment of social security grants and salaries at the end of the month, despite the extensive damage to the infrastructure of banks in KwaZulu-Natal and parts of Gauteng in the recent unrest.

There were over 1 400 automatic teller machines (ATMs) and 269 bank branches that were vandalised or destroyed in the unrest. Of the ATMs, 565 were in Gauteng and 650 in KZN. Of the branches, 126 were in Gauteng and 140 were in KZN. Despite the disruption of cashpoints, there is currently no shortage of cash in the affected areas.

The South African Social Security Agency (SASSA) distributes 2 012 894 old-age pensions, child support and disability grants in Gauteng and 2 669 885 in KZN. Across the country, 12,5 million social grants are paid using banking infrastructure, every month.

Banks, retailers and the South African Post Office (SAPO) are working with the SASSA to ensure that there are cash and grant pay points within a reasonable distance of SASSA beneficiaries in the areas where banking, SAPO and retail infrastructure has been destroyed. This does not mean that all grant beneficiaries will be able to make use of their usual cash withdrawal points, which may have been vandalised and not yet repaired. 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.

Banks, together with other stakeholders, are presently working with SASSA to assist with the re-introduction of the Covid-19 Social Relief of Distress Grant. The banking infrastructure of the country serves all South Africans. It has proven its resilience but must be protected from further attacks. The looting and destruction of banks in KZN and Gauteng are criminal acts that undermine the welfare of all South Africans and the perpetrators must be brought to justice.

Banks are still in the process of assessing the damage to their infrastructure and developing recovery plans. An indicative average replacement cost of an ATM in South Africa is R385 000, with additional installation costs. These costs can vary greatly for any individual ATM and not every vandalised ATM will need to be replaced. The replacement or refurbishment costs of a bank branch are likely to be significantly higher.

Full recovery on bank infrastructure may take some time. Banks are encouraging their customers to use digital banking platforms, which remain resilient and continued to facilitate transactions throughout the unrest.

Each bank will look at what financial relief they can offer to individual businesses and customers. These measures may include bespoke arrangements and targeted payment relief. 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 for small, medium and micro-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 will take into account the documentary evidence produced by claimants when considering the provision of bridging finance facilities. Government’s continued unequivocal support for SASRIA is vital to the success of these measures.

It is clear that uninsured businesses hit by the unrest will need government support. The destruction caused by the unrest necessitates an injection of equity to rebuild businesses, often from scratch, as they can no longer generate revenue to repay loans. These businesses need alternative relief measures, ranging from targeted grants to temporary measures such as the suspension of rates and taxes to help reduce business expenses and encourage their rapid re-establishment, to protect jobs.

One of the key lessons from the Covid-19 Loan Guarantee Scheme, set-up to help small businesses through the pandemic, is that entrepreneurs are unwilling to take on additional debt in times of business and economic uncertainty. The Covid-19 Loan Guarantee Scheme came to an end on 11 July 2021. The total number of loans approved over the life of the scheme was 15 012, with a value of R18,43 billion. The average value of a loan 1,23 million and 82% of loans went to businesses with a turnover of R20 million or less.

At the request of the National Department of Health (NDoH) BASA is facilitating the establishment of worker- based vaccination sites for employees in banks and broader financial services sector. A financial sector worker-based vaccination site opened in Gauteng, Sandton, on Monday 26 July 2021, and has already successfully administered its first vaccines. At present the site is vaccinating about 640 people a day, but this should increase to close to 1 100 daily in the coming weeks. BASA is presently working with the department to identify vaccination sites for financial services employees in other parts of the country.