Travel industry members are describing a ‘catch-22’ nightmare in the tourism, travel and hospitality sectors. The very schemes – set up as joint government and banking sector initiatives to support small, medium and micro enterprises (SMME) businesses impacted by the pandemic –  are declining the loan applications by small businesses in the travel, tourism and hospitality  sector because these businesses are seen as ‘high risk’ due to the government-imposed COVID-19 regulations and restrictions.

“The tourism sector has been classed as a high-risk sector and this is across the whole First Rand Group. As a responsible lender, the bank would need to ascertain when the markets will open and how the businesses will start repaying its debts. In view of high-risk income and no turnover and the uncertainty in this specific sector and the country, the bank will not be able to assist with any finance or COVID-19 loan facilities,” said a response from FNB (in an email that Tourism Update has seen), to director of Bikes ‘n Wines, Quintin Smith.

FNB declined Bikes ‘n Wines’ application for a COVID-19 SMME loan. When Smith queried it, the bank reiterated its stance by email as follows: “The bank in general has found it difficult to finance any entities operating in the tourism sector as it has been categorised as a high-risk sector. I have had other clients who operate in the tourism sector where we have done the whole credit application and motivation, the businesses had good business models, even in the COVID-19 period and going forward with their own risk mitigation in place, but the bank couldn’t find a base to assist as the next six months have been established as uncertain.”

Smith says without financing he has had to permanently close his Cape Town-based shop, retrenching four members of staff, and putting a further 14 staff members on temporary furlough.

But SME customer segment head at FNB, Jesse Weinberg, responded to Tourism Update’s queries as follows:

“FNB can confirm that tourism businesses have been receiving COVID-19 relief provided to all customers whose financial position has been impacted by the pandemic. Furthermore, applications for extended COVID-19 cash flow relief continue to be evaluated and are granted on a case-to-case basis. All customers, including tourism businesses, may continue to receive support through the COVID-19 Loan Scheme.

“We are working together as the banking industry through BASA with National Treasury and the SARB to make constructive amendments to the Scheme. We remain committed to supporting all our business customers to minimise the impact of COVID-19.”

Owner of Travel VIP, Paula Varges Martini, told Tourism Update that her SME-relief loan had also been declined by Nedbank, who cited “lack of industry affordability” as the reason why her loan had not been approved. Varges’ business had been operating for more than 10 years, turning over more than R3 million a month at the time that lockdown began.

Head of corporate communication at Nedbank, Annaleigh Vallie, responded to Tourism Update’s questions, saying that due to client/banker confidentiality she was not able to comment on the specifics of client accounts. “Nedbank has approved COVID loans to several businesses within the travel industry during this period and remains committed to assisting all businesses during this time where possible,” added Annaleigh.

Owner of African Twist Travel, Gisela Piercey, also attempted to trade in her car for a smaller model but her application to finance the smaller car was declined by all the banks except Nedbank. A finance representative at the Claremont-based motor dealership told Gisela that the banks were not extending credit to individuals who worked in tourism and hospitality, as these industries had been reclassified as high-risk sectors.

Tourism Update approached Absa and Standard Bank to find out if they were also now classifying tourism businesses as high risk. Absa’s deputy chief executive of retail and business bank, Bongiwe Gangeni, responded that Absa was offering support to its clients in the tourism sector based on their financial position and specific individual circumstances.

“A one-size-fits-all approach, which treats all clients the same, purely based on the sector in which they operate, is unsustainable. We have approved COVID-19 Government Guarantee Scheme loans to clients in this sector, based on normal credit lending criteria and the repayment ability of each specific client. We have also provided other forms of support to qualifying clients in this sector. Many of them have been banking with us for a long time,” said Gangeni.

“Based on a number of risk indicators and metrics that we monitor, the tourism and hospitality industry does present a higher risk in the current economic conditions due to the lockdown rules and impact of COVID-19. However, it is important to note that it is a very diverse industry – clients have experienced the impact of the lockdown and COVID-19 to varying degrees, depending on their typical client base, their underlying financial position when the country entered lockdown and their track record with Absa,” she added.

Standard Bank did not respond.