Assessing South Africa’s Loan Guarantee Scheme to support firms during the Covid-19 Pandemic

Abstract

This article presents a timeline and data on South Africa’s Loan Guarantee Scheme (LGS) established in response to the Covid-19 pandemic. It defines the LGS take-up rate as a key measure of the effectiveness of the policy’s design and implementation. It references relevant theoretical literature, on co-ordination theory, incentive structures, information asymmetries and market failures, to provide explanations for the low take-up rate of South Africa’s LGS. It presents comparative data on the take up rates and design features of LGS-type interventions in a number of other countries. Finally, the article draws lessons from South Africa’s LGS experience which would be relevant for planners and policy makers implementing similar such policies in future.