Benefits of Covid-19 rescue fund start to be felt in South Africa

When South Africa went into lockdown in late March small businesses across the country feared the worse.

Jacob Zuma’s premiership had all but bankrupted the country with high-profile corruption scandals, such as Guptagate, leaving the national coffers empty. There could be no government-led Western styled fiscal stimulus packages to mitigate the impending economic crisis.

Recognising the severity of the economic damage that would be caused to the county and the hurt to millions of the most vulnerable members of society, the South African private sector has stepped up like almost no other country in the world.

Within a week of the lockdown being announced, four of the wealthiest families in the country stepped in to try and fill the gap that government had left by providing rescue grants targeted for Small, Medium and Micro-sized Enterprises (SMMEs), shielding them from the worst financial effects of the coronavirus.

One of the additional benefits of these interest-free loans being run through the private sector is the efficiency at which they can operate, free from unnecessary bureaucratic red tape which has delayed many western countries’ much acclaimed stimulus packages from reaching their intended beneficiaries.

Proof of this came this week when it was announced that the South African Future Trust (SAFT), launched by the Oppenheimer family on 6 April, had approved interest-free loans totalling R638m, which will directly support more than 55,000 workers at over 5,800 businesses.

The fund is expected to soon be providing a safety net to around 90,000 employees.

Describing the threat Covid-19 posed to the South African economy, Jonathan Oppenheimer told Business Live Newspaper:

“The US is going to spend $2-trillion, the UK is spending at least $500bn not to switch off the engine. We cannot afford to switch off the engine, because if we do we'll be in a true depression. So we need to find ways not to do that.”

Part of the success of SAFT is down to the collective relationship with South Africa’s banks. Having launched with four partner banks, ABSA, FNB, Standard Bank and Nedbank, the fund has now welcomed Investec and Mercantile, meaning that there is no hold up with funds being distributed directly to the accounts of the beneficiaries.  

Speaking at the time of the launch, Kabela Thago, who owns a retail store outside Midrand, said of the fund, “It is small businesses like ours right across South Africa that pay salaries to employees living really tough lives anyway. This donation of R1bn will literally save the lives of some of the most vulnerable members of our society at a time of their greatest hardship”.

This week President Cyril Ramaphosa signalled an easing of lockdown measures across the country, some of the most restrictive in the world.

While there may be an easing in terms of the daily infection rate, the impact Covid-19 will have on the economy has yet to be seen.

[Photo: Maritzburg College]