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The banking industry may need to step in to provide financial relief to other sectors of the economy that the R500 billion coronavirus package that President Cyril Ramaphosa announced Tuesday is not reaching, says Investec CEO Fani Titi.
The case in question are the large companies that generate more than R300 million in turnover per year. The R200 billion loan guarantee scheme that the President announced has been aimed at helping small and medium-sized businesses not to accommodate them. The scheme that the government will launch soon in association with the country’s main bank will only help companies with a turnover of less than R300 million a year in its initial phase.
“Each of the banks has gone deep enough into their pockets to support society and small businesses. But also, obviously it will be necessary to support big business.”
“Some of those companies will have access to capital markets, through debt programs or rights issues. We will continue to work on solutions in addition to the R200 billion program that has been announced by the Treasury,” he said.
Details of the scheme are still being considered by different banks that will each announce details of their participation and any additional rating criteria within the next week, Titi said. He said SA Reserve Bank has relaxed capital adequacy requirements for banks, putting them in a better position to extend more relief to their clients.
“We have to support society at this time of crisis,” he added.
More sectors remain outside the safety net.
While Titi uncovered the gap in restoring larger companies, Black Business Council President Sandile Zungu also noted that informal companies like spaza and chesa nyama stores, which are not registered taxpayers, are also unable to access these loans. .
Similarly, Glen Silverman, director and CEO of GS Investments, said Thursday that people who work in the concert economy, such as artists and freelancers, have been left out of the safety net because they do not qualify for the benefit of the unemployment insurance fund. Commission winners have also raised similar concerns.
Titi said the limitations to the government’s stimulus package were, however, understandable, given that SA had no room in its treasury to move in the first place. In fact, a stimulus package equivalent to 10% of the country’s GDP almost equals that of the United States, which has so far injected a stimulus of just over 10% of its GDP, he said.
SA’s response remains exemplary
Titi previously expressed concerns that the country’s blockade could result in social harm. The He said that the Covid-19 package, of which R50 billion will go towards completing social grants and temporarily providing the Socorro Social Relief grant to unemployed people, has largely addressed the immediate social distress in the country.
And because most people understand that the President’s drastic blockade measures were necessary, they will most likely “respond appropriately.”
He added that the country’s “bold and scientific” approach to responding to the virus threat surpassed that of the UK with good resources in which Investec also has operations. For example, the UK has struggled to conduct significant mass testing, he noted.
But even then, SA’s economic response, which it believes has lagged behind the health response, must reflect further. Because the relief the government has provided is only temporary, SA needs to return to productivity to limit the depth of its recession in the medium term, he said.
“The blockade cannot be too long because people generally live by hand to mouth and paycheck. The relief that the president has implemented will help, but it is not substantial given how restricted our fiscal space is,” he said. said.
A longer road awaits
The gradual opening of the SA economy, which will allow different industries to resume operations at different stages of the five phases of the country’s closure, is well thought out, Titi said. But, structured as it is, it is inevitable that some sectors, such as hospitality and property, will fare much worse, especially as more people are likely to stick with their long-term home work arrangement.
“I think it will take 18-24 months for people not to worry again. Normal retailers, in my opinion, will see lower inbound volumes. In the longer term, prospects for retail capacity expansion are likely to increase. be silenced, “he said.
Malungelo Zilimbola, CEO and Chief Investment Officer of Mazi Asset Management, said the real estate sector in general is in trouble because with most people working from home, companies have realized they don’t need as much space as they currently occupy. . The accelerated move toward online shopping will also likely cause retailers to rethink their space in shopping malls.
“I think we are going to a new normal and I think the sector that will be most affected is the real estate sector … let’s hope for storage perhaps given the import trends and online shopping,” he said.
