By: Anna Majavu
The time has come for the government to instruct the SA Reserve Bank to institute lending quotas for black SMMEs, who remain starved of credit and unable to grow their businesses. This is the view of the economist and director of the Centre for Economic Development and Transformation, Duma Gqubule. He says lending quotas on banks in countries in Asia, which include priority sector lending to SMEs, have stimulated the growth of SMMEs.
“In terms of the commercial banks, we are not dealing with normal risk aversion towards small businesses which is there throughout the world. We are dealing with something more than that. I believe we are dealing with racism from the banks,” Gqubule told Vutivi News. Commercial banks were the single largest source of financing for SMEs, but the most recent figures available showed that the banks only lent 0.5% of their R6.6 trillion banking assets to SMMEs in 2020, Gqubule said.
In 2022, SMME development finance institutions like the Small Enterprise Finance Agency (Sefa) and the National Empowerment Fund (NEF) disbursed just R3.4 billion to SMMEs. “There was also a R200 billion loan guarantee during Covid and less than 10% was lent to SMMEs,” he added. There were currently 2,683,602 SMMEs in South Africa suffering a credit gap estimated by finance institutions and the government to be between R300 and R350 billion. The low lending rate by the major banks and government left a gaping hole of hundreds of billions of rands in credit that SMMEs needed, but were not getting, Gqubule added.
He said both commercial banks and the government needed to “get very serious about SMMEs and step up their commitments”. “The South African Reserve Bank can recapitalise the development finance institutions, as can the government. Sefa and NEF… must be able to do much more than they are currently doing in terms of lending to SMMEs. They haven’t spent much at all. It is untenable that the vast majority of SMMEs don’t get funding,” Gqubule said.
When asked if their low lending rates to black SMMEs were motivated by racism, First National Bank (FNB) and Nedbank would not comment. An ABSA spokesperson said that “race is not a consideration when assessing applications for credit”. Absa was “committed to financial inclusion and continues to take meaningful steps to ensure we can support SMMEs across society, including black-owned SMMEs”, said the spokesperson, citing the bank’s new green energy asset finance and enterprise development initiatives. “Each application for credit is unique and is consequently assessed on its own merits, including the financial history of the applicant and affordability,” the spokesperson added.
Oscar Siziba, Head of Client Coverage for Business Banking at Standard Bank, did not comment on whether the low lending rate was because of racism. He said Standard Bank offered green energy and several other types of SME finance and had disbursed R118.9 million in grants and loans to 766 businesses in 2022 and offered payment holidays to struggling companies. “With over 160 years of providing financial services across 20 markets on the African continent, we know very well that enabling entrepreneurs to start, manage and grow their businesses is integral to achieving our purpose,” said Siziba, adding that Standard Bank also offered SME’s business advice and master classes.