The Covid-19 Loan Guarantee Scheme provides loans, substantially guaranteed by government, to eligible businesses to assist them during the COVID-19 pandemic. Funds borrowed from this scheme, through the banking industry, can be used for operational expenses, such as salaries, rent and lease agreements and contracts with suppliers.
The loans are granted at a preferential rate (prime) and repayment may be deferred for a maximum of one year after taking out the loan. Businesses will then be required to repay the loan over five years. Banks are not permitted to profit from these loans and any surpluses generated will accrue to National Treasury.
Government and commercial banks are sharing the risk of non- repayment of these loans. The National Treasury initially provided R100 billion to the banking industry through the South African Reserve Bank, with the option to extend the scheme to R200 billion if required.