Lending  |  SME  |  Tax  |  Crowdfunding  |  Fintech  |  AlphaCode  |  Company Culture  |  Savings & Investments  |  Fund Raising

Relief is available for South African SMMEs as a COVID-19 response

Published on April 6th, 2020

On Monday 23 March, President Ramaphosa announced a nationwide lockdown for 21 days which began from midnight on Thursday 26 March. He acknowledged that this would have a devastating effect on the South African economy and businesses, with some economists predicting massive job losses. To limit the economic impact of the shutdown on the economy, Ramaphosa said the government would facilitate efforts to support the economy. The private sector has also stepped up in support. With respect to the Solidarity Fund, Endeavor is also assisting the fund and project managers, wherever required.

Documented here is some of the Government and non-Government relief available and how this relief may be accessed (where this information is available). It was compiled by the team at Endeavor and will be updated periodically. ‘Endeavor South Africa is leading the movement to catalyze long-term economic growth by selecting, mentoring and accelerating the best High Impact Entrepreneurs in South Africa.’

1. Government SMME Relief Fund

The Department of Small Business Development has promised a debt-relief fund for small businesses.

To qualify, businesses must:

  • Register on the Department of Small Business (the National SMME database) for financial and/or non-financial assistance: www.smme.sa.gov.za;
  • Have annual turnover of <R20m (according to President Ramaphosa’s speech);
  • Have been negatively affected by COVID-19 outbreak;
  • Be UIF compliant;
  • Be registered with SARS and tax compliant;
  • Be 100% SA owned;
  • Have at least 70% SA employees

Applicants will be screened by way of that register. The process is, apparently, for now, separate from the Solidarity fund that the President announced. As at 6 April, the site was still limited only to a form for businesses to submit, with no indication of assistance (monetary/non-monetary) that might be available.

Read more on Business Insider: Small businesses in SA can now register for help during the coronavirus disaster

2. Solidarity Response Fund

According to the fund’s website: Through this Fund, individuals and organisations will be able to support these efforts through secure, tax-deductible donations. The Solidarity Response Fund will operate with the highest principles of corporate governance and through an independent Board. All activities will be reported in a transparent manner.

The Fund administration will be done through professional managers and organisations in the private sector.

The initiative aims to:

  • Prevent the spread of the disease by supporting measures to "flatten the curve" by lowering infection rates;
  • Detect and understand the magnitude of the disease;
  • Care for those in hospital or medical care; and
  • Support those whose lives have been disrupted by the pandemic.

The fund has made R100 million available as working capital to urgently fund the purchase of critical medical supplies to protect health workers. Individuals and organisation can make a donation to the Solidarity Response Fund.

3. Government Employment Assistance - consolidated by LabourNet

The Unemployment Insurance Commissioner, after consultation with Unemployment Insurance Executive, has also developed Temporary Employer-Employee Relief Scheme (C19 TERS) to contribute to the containment of pandemic and its impact. Employers that have to enforce lockdown as regulated and who might require financial assistance from the UIF can access information regarding available funding by emailing covid19ters@labour.gov.za.

This is geared towards companies that have recently experienced closure directly linked to the COVID-19 pandemic. To qualify, companies must be registered for UIF and comply with the initiative’s application procedure.

Temporary Employee / Employer Relief Scheme: On the 25th of March 2020 a directive by the Minister of Employment and Labour was signed and circulated. The directive is called COVID-19 Temporary Employee/Employer Relief Scheme (C19 TERS). It aims to make provision for:

  • Payment of benefits to the contributors who have lost income as a result of COVID-19
  • Minimise economic impact of loss of employment
  • Avoid contact and to contain the spread
  • Online applications for benefits in order to avoid contact during the national disaster period
  • Establish a Temporary Employer/Employee Relief Scheme

According to the C19 TERS:

  • Should the employer close its operations for three months or for a lesser period and suffer financial distress, the company shall qualify for the benefit;
  • The benefit is delinked from the UIF’s normal benefit. The rule that will apply: an employee will accumulate one (1) day for every four (4) days worked;
  • The benefit only pays for the cost of salary for employees during the temporary closure;
  • The salary benefit will be capped at R 17 712.00 per month. The employee’s benefit is calculated in terms of the income replacement rate sliding scale (38% - 60%) as per the UI (Act);
  • Should the employee’s income determined by the income replacement sliding scale fall below minimum wage of the sector, the employee will be paid a replacement income equal to minimum wage of the sector.

4. Banks

From First National Bank’s press office:

  • All essential banking services will remain open during the lockdown to ensure clients can continue to access financial services.
  • Clients are encouraged to transact at ATMs and from their homes – by internet and with smartphone applications - wherever possible, and only visit branches when absolutely necessary.

FNB believes that SMEs and an economically viable consumer market are vital to the country’s economic growth prospects. It is the collective responsibility of both the government and the private sector to continue working together to identify immediate and long-term initiatives that will provide relief. Furthermore, the Bank remains open for business to assist SMEs that qualify for credit to stabilise their cashflow and consumers who may want to cover unexpected expenses.

  • Clients that are in good standing i.e. those that are up to date with commitments and have historically conducted their relationship with FNB responsibly – who are now experiencing financial challenges as a result of Covid-19, should contact their banker who will, on a case-by-case basis, assist with appropriate solutions. These solutions could include suitable payment deferrals, the restructuring of debt, the provision of small and medium enterprise (SME) bridging finance and liaising with government and others who are providing additional support mechanisms.

All bank staff performing non-essential services and those who can work from home have been allowed and enabled to do so.

Standard Bank announced it is giving all of its business clients with a turnover of less than R20 million per year a debt repayment holiday of three (3) months.

  • Their business clients don't have to pay debt instalments until the end of June, but interest and fees will still accrue during this time.
  • Businesses don't need to apply for the holiday - they will get it automatically if they are not behind on payments and "in good standing" with the bank.

From Absa Bank’s COVID response page: We are working closely with the South African Reserve Bank, our Third-Party Service Providers and the industry at large to ensure we manage the country’s cash supply in the best possible manner. We have comprehensive plans in place to try and ensure that there is uninterrupted supply at our ATMs, nationwide. If you visit a branch, you can have the peace of mind knowing that we have implemented strict interventions across all our offices, including branches, to ensure your safety and that of our employees.

This is a trying period and should you experience financial difficulty, rest assured that we have an “always on” assistance programme. If you are battling to meet your financial obligations, please approach us – we are only a phone call away and are determined to assist. We would like to strengthen our call to customers to approach us directly in the event of any form of uncertainty, including financial distress, during these unprecedented times.

A three-month payment holiday was also announced on certain loans and facilities. Clients can enquire with their bankers for more info.

Nedbank said: This undertaking to work alongside and support our clients with suitable individual solutions to cashflow challenges they may experience as a result of Covid-19 extends to any loan agreement they have with us. This support could include deferring payments (or part thereof) for a suitable period, extending existing loan periods or extending additional credit to manage short term cashflow shortfalls.

We undertake to work with our clients to help them through this period of enormous challenge for all South Africans.

Clients are encouraged to contact the bank on 0860 555 111 or small business clients can speak to their dedicated relationship banker if they need to restructure their debt or change their payment arrangements as a consequence of Covid-19.

Investec calls for ‘calm amid the storm’. Investec encourages clients to get in touch with their primary Investec contact with any questions. 'We will keep your needs uppermost in mind given your unique requirements across our various divisions and regions. We commit to providing you with relevant updates regularly,' says Investec.

5. More members of the community help out

a. Merchant Capital

On Friday, 27 March 2020, Merchant Capital announced: 'We have decided to institute a 21-day payment holiday to the majority of our client base, which includes many thousands of small businesses. For the duration of the lockdown, we will process no repayments for these clients.'

b. COVID Business Rescue Assistance (COBRA)

This was launched on Monday, 23 March 2020 by Shindlers Attorneys, IQbusiness, Agility and Engaged Business Turnaround. They offer pro bono services to businesses needing urgent assistance; with bank, government and stakeholder support. To register for the daily Q&A sessions (10h00 weekdays) limited to 30 participants; register here. For the large group panel discussion on Fridays at 10h00, register here.

c. Bridgement

According to their website, Bridgement can ‘improve your cash flow in under 24 hours. Access between R10,000 and R5,000,000 in finance with a Bridgement facility.’

d. Lulalend

They’re ‘your friends in funding’. Lulalend ‘provides fast, flexible business funding to SMEs and sole traders.’

e. Geddes Capital

Cape Town-based financier Geddes Capital says: During these unprecedented times we are here to help you and your business navigate through the challenges. If you need advice, mentorship or funding please click on the button below and a member of our team will get in touch immediately.

If you need advice, mentorship or funding; a member of their team will get in touch immediately.

f. The Beancounter

Marnus Broodryk, founder and CEO of accounting firm The Beancounter, and their community of business owners compiled an eBook that you can now download for free: The Small Business COVID-19 Survival Guide. The book is a collection of 90 practical tips business owners can implement to stay afloat and get ahead during these turbulent times.

g. Runway Fund

Seasoned entrepreneurs and investors, Ran Neuner and Yossi Hasson, have set up the Runway Fund a platform that offers either funding or mentorship or both, in aide to businesses navigating the current environment.

6. Proposals and Relief in Terms of Tax

As per usual, your account manager will be helping you to complete all the calculations and payments. We are awaiting finer detail on how the new proposals will be implemented.

In light of the coronavirus, and national lockdown, SARS has introduced a number of changes with regards to business' liabilities over the next four to six months:

  • You can now delay SARS payments, and therefore improve cash flow Businesses with an annual turnover of less than R50 million, and who are tax compliant, will be allowed to delay 20% of their PAYE contributions over the next four months. A portion of your provisional corporate income tax payments can also be delayed for six months without incurring penalties or additional interest.
  • You can now claim more from the ETI incentive scheme Businesses who employ young individuals and meet a certain set of requirements can already claim an incentive against the Employee Tax Incentive (ETI). President Cyril Ramaphosa announced that these incentives will be increased by an additional tax subsidy of up to R500 per month for the next four months, limited to private sector employees earning less than R6 500 under the scheme.
  • Increased employee tax incentive payouts SARS' employment tax incentive reimbursements will also soon be paid out monthly instead of twice a year in a bid to get additional cash in the hands of compliant employers as soon as possible.

7. Spartan Relief Registry

This registry categorises various programmes and mechanisms as follows: SME Relief Funding; Essential Services; SARS; Employees; Individuals

The website refers to the following programmes:

  • Department of Small Business Debt Relief Fund (R500m);
  • Department of Tourism (R200m);
  • Small Enterprise Finance Agency;
  • Standard Bank

Some of these programmes are still under development, they typically go through the phases of announcement, then development, then operationalisation (processing applications). If an application mechanism doesn’t exist right now then check back regularly as this page is updated continuously...