Government will soon launch a new business bounce-back scheme aimed at supporting businesses in distress owing to the Covid-19 pandemic, finance minister Enoch Godongwana has announced. Making the announcement while delivering the 2022 Budget Speech on Wednesday, the minister said the scheme would use two mechanisms that would be introduced sequentially. First, small business loan guarantees of R15bn would be facilitated through participating banks and development finance institutions.
“This allows access for qualifying non-bank small and medium loan providers. Government will partner with loan providers by underwriting the first 20% of losses for banks and other eligible small and medium loan providers.
“The eligibility criteria, including the requirement for collateral, has been loosened. This mechanism will be launched and be operational next month.” Second, by April this year, government intends to introduce a business equity-linked loan guarantee support mechanism.
“We intend to bring the total support package through the bounceback scheme to R20bn. The equity support mechanism of this scheme will be facilitated through DFIs [development finance institutions]. It will also be available to qualifying non-bank small and medium finance providers,” Godongwana said.
A Budget Review document accompanying the speech reveals that government will, over the next three years, spend R721bn to promote faster and sustained inclusive economic growth to address unemployment, poverty and inequality plaguing the country. In the 2022 Budget Review, the Treasury said over the Medium Term Expenditure Framework (MTEF), expenditure would in this regard increase at an average annual rate of 8.5%, from R201bn in 2021/2022 to R256.8bn in 2024/2025.
The document states that over the medium term, the department of small business development would promote youth entrepreneurship by supporting at least 15,000 youth-owned enterprises.
“It will also reintroduce the Youth Challenge Fund at an estimated cost of R91.3m, harnessing creative solutions to address youth unemployment,”
The document reads. Noting that access to finance, particularly for the early stages of business development, is crucial to sustain small businesses, The Treasury said it would continue rolling out the Township and Rural Entrepreneurship Fund, implemented through the Small Enterprise Finance Agency, at an estimated cost of R2.9bn. Department allocations The Treasury said the government had allocated R1.3bn to the Agricultural Production, Biosecurity and Resources Management Programme in the department of agriculture, land reform & rural development for inspection, quarantine and biosecurity.
The Budget Review states that among other things, the allocation will also be used to strengthen the biosecurity, sanitary and phytosanitary standard required by international markets.
“To ensure sustainable development and social justice, R14.6bn is allocated for land reform and restitution, and R6.8bn is allocated for blended finance programmes, farmer development and post-settlement support initiatives.”
The department of science and innovation is allocated R28bn over the MTEF period. In this regard, priorities will include implementing the 2021-2031 plan on science, technology and innovation —which is expected to support mining, manufacturing and agricultural innovation, and supporting the National Research Foundation.
The Treasury allocated R360m to the department of tourism for it to focus on supporting recovery in the tourism sector through the pilot phase of the Tourism Equity Fund introduced in 2021. A further R240m is allocated to enhance tourism assets and infrastructure, with R80m being reprioritised to support short-term jobs in tourism.
The department of forestry, fisheries & the environment has reprioritised R244m over the MTEF period to improve institutional capacity and modernise meteorological services at the South African Weather Service. “A total of R17.8bn is allocated over the next three years to support business investment in new equipment and infrastructure through incentive programmes such as the automotive investment,” reads the document. —