South African banks are being criticized by labor unions and small business owners for not doing enough to help struggling customers as the coronavirus lockdown looms.
“The response is quite underwhelming,” said Matthew Parks, a parliamentary coordinator for the Congress of South African Trade Unions. “There are too many ifs and buts. It’s hitting too few people. It’s just more bureaucracy.”
Cosatu wants a “big bang intervention” that will result in across-the-board loan deferments, said Parks. He leads the delegation of the nation’s largest labor federation at the National Economic Development and Labor Council, a forum for the government, business and community members to discuss challenges facing the country.
The lenders weren’t allowed to hammer out a coordinated response until this week, when they received approval from antitrust authorities to work together.
Customers who are up to date with debt payments have been encouraged to call their banks for help if they’ve run into trouble because of Covid-19, and a tailor-made solution will be found for them, Banking Association South Africa said in a statement on Thursday.
Grant Ravenscroft, 51, who started Johannesburg restaurant Croft & Co. in 2006, recently moved to a bigger premises and found business started with a bang.
But that has slowed right down as the number of infections in South Africa grew. Banks have been slow to respond to his requests for assistance sent about a week ago.
“It’s dire for many small businesses and I can’t see three or six months down the line,” he said. “As long as there is fear, people will stay away and so even after a shutdown, it’s hard to know what it will look like.”
The approach by South Africa’s commercial banks contrasts with stimulus measures around the world to use banks to keep greasing the economy’s wheels. In Turkey, lenders offered customers relief from repayments for three months, and up to 12 months for companies.
“You need to look at this on a nuanced basis,” said FirstRand Ltd. Chief Executive Officer Alan Pullinger. “Some of our customers don’t need any help, don’t want any help and can happily continue to make their payments. They could even be irritated if we stopped the payments on their facilities. There are customers that may need help and we are reaching out to them.”
In some other markets where mortgage payments were suspend, these were done with the backing of government’s Treasury departments, which isn’t the case in South Africa, he said. “That’s obviously a very different scenario and it’s easier for the banks to say ‘we can offer help to all of our customers.’”
Banks will be asked to step forward to help lift growth in the economy, which was in a recession even before the coronavirus spread, Pullinger said. “That means that the banks need to be in decent shape. We also need to manage our businesses in this period. We will look after customers but we also have to look after ourselves so that we can do our jobs when we get through it.”
Calls for more action come after a labor union known as Sasbo, which represents 73,000 banking employees, slammed companies for not informing staff on how the 21-day lockdown, which begins midnight Thursday, will affect workers.
While Standard Bank Group Ltd., South Africa’s largest bank, has offered small businesses and students a three-month payment holiday, its peers — including Absa Group Ltd. and Nedbank Group Ltd. — have urged customers to proactively contact them.
Arrangements could include suitable payment deferrals, the restructuring of debt or the provision of small and medium enterprise bridging finance.
“We will take all possible steps to assist customers in financial distress,” Absa said in an email. Any meaningful cushioning of customers would likely flow from the collective effort of the banks as a “fragmented approach would not go far enough.”
Nedbank is not going with a one-size-fits-all approach, the Johannesburg-based lender said. Still, it has developed a payment holiday offering and instituted other relief measures, such as waiving fees on card purchases and adjusting minimum monthly payments down to 2.5% on all credit card products.
“We have received many calls and emails from clients enquiring about a wide range of payment arrangements,” Nedbank said. “Due to the increase in the numbers of requests at this challenging and difficult time, our response may be unintentionally delayed.”