The Covid-19 loan guarantee scheme announced by President Cyril Ramaphosa in April was activated on Tuesday, according to government.
A joint statement by National Treasury, the Reserve Bank and the Banking Association SA said the legal details around it had now been worked out.
The initial set of participating banks were now ready to accept loan applications from businesses who met the criteria. The banks included Absa, FNB, Investec, Mercantile Bank, Nedbank and Standard Bank.
The scheme would provide loans guaranteed by government to businesses with an annual turnover of less than R300 million to meet some of their operational expenses.
According to the statement: “Funds borrowed through this scheme can be used for operational expenses.”
This included salaries, rent and lease agreements and contracts with suppliers, for example.
Government and commercial banks are sharing the risks of these loans.
Initially, National Treasury provided a guarantee of R100 billion to the scheme, with the option to increase the guarantee to R200 billion if the scheme was deemed successful.