COVID-19: Payment Relief and Other Government and Private Sectors Interventions for SMEs in South Africa
Introduction
It’s been twenty-five days since the first reported case of COVID-19 in South Africa. Hence the government has taken measures to contain the spread of the disease such as closing down the border and also closing down most gathering institutions such as schools and cinemas in the country. Therefore, there has been a burn on international travels and hence airports are closed. And therefore, there are over 1300 reported cases of COVID-19 victims in the country, hence living the economic situation in the country at a standstill.
In the seond and third week of the spread of the virus, most institutions ran out of resources such as gloves and masks and therefore they were forced to recycle the same masks and glove to try and protect themselves from the infection. And from time to time, most medical practitioners could come into contact with the patients since they were not wearing any gloves.
Due to the panic, most citizens in the country had to shop in bulk hence leaving most supermarkets out of stock. Since the lockdown from 23rd of March the economy was on standstill and hence there was a decline of about 6% of the country’s GDP, and therefore industries such as tourism was highly affected followed by hotels, transport sectors among many others.
Economic disaster
On 23rd of March, the president announced measures not only to curb the spread of the disease but also to support its citizen such as wage subsidies, tax relief for low-income earners and relax tax payment schedule for SMEs under 50million rands annual turn over.
Several relief packages for small businesses, including tax relief, have been announced since the country went into lockdown to curb the spread of COVID-19. However, there is frustration and uncertainty around the difficulties in finding these programmes, accessing their webpages, or how each one works and how to apply, says Spartan SME Finance CEO Kumaran Padayachee.
“As with any crisis, timing is always critical and many of these programmes are understandably still being operationalised,” he adds.”The financial relief announcements have been somewhat of a healing balm to the ears of entrepreneurs”. The swift reactions and proactivity of the government and the private sector in putting these lifelines in place are highly commended, says Padayachee.
According to Duma Gqubule (2020), the full package of intervention by the government won’t be enough for already an exposed economy. When the government takes two-thirds of the GDP offline to support its citizens, there would outcomes such as reduction of the country’s economy twice as much since the global economy went down thus after the epidemic. And therefore, to regain the loose thousands of people in the country might lose their jobs.
RELIEF MEASURES AND CONTINGENCY PLAN
Due to the hardship in the country companies such as ABSA offered a relief programme to south African citizens, affected by COVID-19 by offering short term liquidity relief for three months. Among many other such as :
- Relief for consumer, business banking and wealth customers
- Bespoke solutions for corporate and business banking clients
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- Additional administration fees waived
- To allow benefits to reach more customers, those who can pay are encouraged to continue payments.
- The programme applies to all Absa markets, subject to legislation, regulations and conditions applicable in each country
Small and medium enterprises (SMEs) may apply for R250 000 to R1 million in funding from the R1-billion donation the Rupert family made to assist businesses in financial distress as a result of COVID-19[1]. Therefore, an online application portal will be launched by the end of the week through which SMEs can apply for loans, which is repayable in five years[2].
Standards Bank partied first as it offered a payment holiday of three months in relation to debt repayments for the qualification of the business customers have an annual turnover of at most R20 million. Besides, on its twitter page, the bank indicated its commitment in reaching out to their customers with home and vehicle customers, individually with the options of payment relief.
Nedbank is advising its clients to remain directly in contact with them. This is based on the fact that hey give solutions such as prolonged loan periods, holidays for debt repayment and the short-term credit extensions based on various cases. The banks plan to further announce issues relating to relief offerings in the future.
Menzies encouraged owners of SMEs which are experience challenges in relation to cash flows, to remain in touch with the relevant banks, creditors and suppliers as soon as possible. They mentioned the vitality relating to proactive communication on the inability to meet various commitment to payments within a given period. The step is considered best for the preparation of payment plan for the two parties.
The CEO of First National Bank indicated that between 1st April and 30th June 2020, they will explore the measures that enhances the provision of relief to various businesses and individuals which have been affected negatively by the COVID-19, in relation to their financial stability. The interventions are meant to cover the issues outlined below.
- Relief on the instalment cash flow, at a time which a portion or none of the instalments will be due at a given time.
- A preferential interest rate will apply to the COVID19 relief interventions given;
- No fees will be charged for any relief granted;
- Assistance with processing credit insurance claims, where possible;
- Individualised bridge facilities for those who need it;
- FNB will also waiver Speedpoint device rentals and not charge a minimum fee for some merchants who are in good standing but operate in distressed industries.
- In April, individual and business customers on FNB Connect will also receive 1GB of free data to help them stay connected during the lockdown. FNB is working with industry partners to ensure that customers can use any bank’s ATMs without paying additional fees over and above the fees charged by their bank.
- FNB has also made a significant contribution to FirstRand’s SPIRE initiative contributing, alongside the FirstRand Foundations and RMB, to the group’s total anchor funding of R100m. Through SPIRE, FNB is also providing critical operational capacity (including its payments and governance platforms) to help the healthcare system scale its response to COVID19, with a particular focus on testing equipment, protective clothing and ventilators for hospitals.
The Department of Small Business Development has also shown commitment concerning mitigating the severity of the effect on SMEs. The government, through this department, offered ‘A Debt Relief Fund,’ which should give relief on the current payments and debts, and also to assist the SMEs during the period of COVID-19 pandemic[3]. SMEs get funded in condition that they demonstrate a connection of the effect of COVID-19 on the operations of the business.
SARS
There are several requirements that have been outlined by SARS in relation to the criteria of qualifying the SMEs that need payment relief during the pandemic lockdown. First, the business needs a registration with CIPS by 28th February 2020. Secondly, owners of the business should be citizens of South Africa with 70% of the employees also being citizens of South Africa. Third, youth, women and those who live with disabilities have the first priority. The business is also expected to be compliant with UIF and SARS (FASA 2020). The business should also prove that it is has been affected by the COVID-19 pandemic negatively. There after the relevant persons in the business will complete the simplified application platform online. The latest management accounts and the latest annual financial statements will also be required. The two documents should not be older than 3 months by the time of application.
BUSA
On the other hand, BUSA seconded financial support through taxation, among other relief for SMEs, which shall experience the negative economic impact of the COVID-19 pandemic. BUSA, through its president, acknowledged the solidarity fund that was announced by the president. The funds shall help SMEs, among other citizens experiencing the economic effects of COVID-19.
Oppenheimer and Motsepe Donations
The family of Oppenheimer has detailed out the processes related to how the businesses from South Africa can make their application for a portion of the R1 billion donation[4]. Employees of the SMEs will have a direct payment, and it will be an interest-free loan. Only companies will be liable to pay the money back but not the employees. The fund per employee will be R750/week approximately for fifteen weeks. Motsepe’s family also outlined the details concerning their 1R billion donations (Luckoff 2020). A portion of the donation will be availed immediately for the purpose of saving lives and to reduce the rate at which the pandemic is spreading.
As outlined in the 25th March 2020 Regulation R.398 in Government Gazette No 4314, there are essential goods, that are offered by some SMEs, which have been exempted from import VAT, under item 412.11/00.00/01. It schedules one of the VAT Act, of 1991, which is read with section 13(3) of the Act.
CONCLUSION
Since the outbreak of the COVID-19 various entities are coming together to support the country during the economic downfall, due to the epidemic the government also has chipped in by donating a recommendable amount just to ensure its people meet their daily needs. while the private sectors such as the banking industry who are currently supporting the SMEs by offering loans.
Reference
AccountingWeekly. 2020. “Business Partners: Rupert money is a donation, not a loan.” AccountingWeekly, April 2: 1-3.
Department of Small Business Development. 2020. “South African Government launch “Debt Relief Fund” to help small business during Coronavirus pandemic.” Debt Relief Fund, March 22: 1-4.
FASA. 2020. “Where to go for SME support.” Cash Crusaders, April 4: 1-5.
Luckoff, P. 2020. “The Motsepe family announced details of the donation on Saturday. Several hundred million rand will be available ‘immediately’.” Motsepe family and associates pledge R1bn for fight against Covid-19, March 28: 1-6.
Money Web. 2020. “Rupert’s R1bn donation: SMEs may apply for funding of up to R1m.” South Africa, April 1: 1-3.
Planting, Sasha. 2020. “Mary Oppenheimer and daughters join Covid-19 battle.” Business Maverick, April 1: 1-3.
[1] https://accountingweekly.com/business-partners-rupert-money-is-a-donation-not-a-loan/
[2] https://www.moneyweb.co.za/news/south-africa/ruperts-r1bn-donation-smes-may-apply-for-funding-of-up-to-r1m/
[3] https://www.goodthingsguy.com/business/south-african-government-debt-relief-fund-coronavirus/
[4] https://www.dailymaverick.co.za/article/2020-04-01-mary-oppenheimer-and-daughters-join-covid-19-battle/