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Small business relief for the COVID19 crisis (updated 21/04)

  • We applaud President Ramaphosa on his decisive action to protect our country’s citizen and declaring a national 21-day lockdown. He also acknowledges the dire impact this will have on the economy particularly small business and employees. In response to this, the government has set up various mechanisms to assist small business. Finer details on some of these are still to be finalised. Government has also called on the private sector to do their part in offering payment relief to their clients

    We’ve compiled a list of the various support packages made available to assist small business and links back to the official press releases/websites. We’ll update as more information comes to light.

    Essential services

    All business that will be allowed to provide essential services need approval first before they are allowed to operate. Apply on (CIPC) Bizportal website at www.bizportal.gov.za. Read official press release

    1. Solidarity Response Fund

    Solidarity Response Fund is a vehicle will work with other initiatives to achieve the following objectives:

    • 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.

    Find out more: https://www.solidarityfund.co.za/

     

    2. Department of Small Business Development

    The Department of Small Business Development has made over R500m available immediately to assist smmes that are in distress. They have established two programmes:

             i.            The Growth Resilience Facility for businesses geared to take advantage of supply opportunities resulting from the Coronavirus pandemic or shortage of goods in the local market.

           ii.            The Debt Relief Scheme for businesses which are negatively a­ffected, directly or indirectly, due to the Coronavirus pandemic

    Criteria:

    • employ at least 70% South African citizens, although preference would be for companies owned by women and the youth.
    • Fully compliant with SARS and UIF
    • Register on national database : https://smmesa.gov.za/  and complete the application form.

    Note that this not grants. It will be structures as loans that will attract an interest rate of Prime minus 5% (currently this is 3.75% per annum). However, those who try to take advantage of the crisis will be punished with interest rates of prime plus 10 percentage points.

    3. Industrail Development Corporation

    The IDC has put a package together of more than R3 billion for industrial funding to address the situation of vulnerable firms and to fast-track financing for companies critical to our efforts to fight the virus and its economic impact.

    The IDC’s immediate priority is to focus on sectors critical to:

    • Limit the spread and immediate impact of the virus
    • Support supply chains critical for the economy

    For more details, see IDC response and IDC COVID-19 Essential Supplies Intervention

    Not the these are not grants and financial instruments will attract a interest rates, albeit below market related.  

    4. The UIF

    Employers that have to close their businesses due to the lockdown, and can’t afford to pay their employees, will qualify for a Covid-19 Temporary Relief Benefit. Staff will get salaries from a special Temporary Employee/Employer Relief Scheme (TERS) that has been created as part of the Unemployment Insurance Fund (UIF). The amounts paid will be a percentage of your salary, according to a legislated sliding scale from 38% (highest earners) to 60% (lowest earners) with a cap of R17 712 per month with a minimum amount linked to the minimum wage of their respective sector.

    Criteria:

         The company must be registered with the UIF;
         The company must comply with the application procedure for the financial relief scheme;
         The company's closure must be directly linked to the Covid -19 pandemic

    Companies to report their closure by emailing Covid19ters@labour.gov.za. An automatic response outlining the application process will follow.

    Click here for the Government Gazette , interpretation more and the agreement with the clothing sector

    5. Department of Tourism

    The Department of Tourism has made an additional R200m available to assist SMMEs in the tourism and hospitality sector who are under particular stress due to the new travel restrictions. The following categories will apply:-

    • Accommodation: Hotels; Resort properties and Bed and Breakfast (B&B’s)
    • Hospitality and Related Services: Restaurants (not attached to hotels); Conference (not attached to hotels), Professional catering; Attractions
    • Travel and Related Services: Tour operators; Travel agents; Tourist guides; Car rental companies; and Coach Operators

    Key qualifying criteria:

    • Maximum turnover of R2.5m per year
    • Must be in existence atleast one year
    • Must be compliant with SARS, UIF and CIPC
    • were not in distress before the Covid-19 crisis

    Normal black-empowerment rules will be followed.  Read the response from the Department of Tourism

    6. Tax relief

    PAYE

    SMEs who are tax compliant and have a turnover of less than R50 million:

    • may defer 20% of their prospective pay-as-you-earn (PAYE) liabilities over the next four months;
    • may defer a portion of their provisional corporate income tax payments without penalties or interest over the next six months.

    We still need get clarity around whether an application will need to be submitted to SARS or whether the relief applies automatically.

    Employee Tax Incentive

    Government has proposed an additional tax subsidy in the amount of up to R500 per month for the next four months per qualifying employee in the private sector.

    The employment tax incentive (ETI) is paid to employers who employ qualifying employees. The existing ETI is aimed at supporting qualifying employees who earn below R6 500 per month on a sliding scale based on salary where the employer is registered for Employees Tax.

    The employer is entitled to reduce the total amount of its PAYE liability by setting off the ETI amount calculated in respect of that month.  Where there is no PAYE to set off against the ETI amount, the employer will be entitled to a reimbursement of the total ETI amount available as at the end of each PAYE reconciliation period.

    A further proposal aims at reducing the reimbursement period to a monthly period.

    Read more from KPMG 

    UIF and SDL contrihubtions

    Government is investigating a reduction in employer and employee contributions to the Unemployment Insurance Fund and a reduction in Skills Development Levies.

    Compensation Fund

    Any employee who falls ill pursuant to exposure to Covid-19 at work will be entitled to claim from the Compensation Fund.  Broadly speaking, claimants are required to include such compensation in their gross income for tax purposes.  The amount is, however, exempt from normal tax in accordance with section 10(1)(gB) of the Income Tax Act.

    7. Bank 

    Standard Bank is giving all of its business clients with a turnover of less than R20 million per year a debt repayment holiday of three months. Read more about their Coronavirus Business Interruption Payment Scheme. Furthermore, if you are an owner of small business wit a turnover of less than R20m then the instalment relief will defer payments on credit cards, home loans, personal loans and vehicle loan payments held Standard Bank from 1 April 2020 to 30 June 2020. Interest and fees will accrue over this time.

    Nedbank are encouraging their customers to get in touch with them directly. They will be offering solutions including debt repayment holidays, extended loan periods, or short-term credit extensions on a case-by-case basis. See Nedbank’s press release  

    FNB’s interventions for eligible customers (i.e those in good standing) will apply to all products with FNB for three months and include payment holidays, preferential interest rates, no fees and bridging facilities. Customers can contact FNB via their usual digital and assisted banking channels to enquire about these services. See FNB’s press release

    ABSA is providing 3 month payment holidays to eligible customers in need of short-term liquidity relief. Support to corporate and business banking clients will entail solutions based on their unique requirements and operations. Businesses and corporates are encouraged to contact their relationship managers for further details. See Absa’s press release

    Contact your other creditors to find out more about their relief measures.

    What is a payment holiday? Payment holidays are simply a freeze on commitments such as loans and bonds for a certain period. However, interest will still accrue over this period and you will be liable to pay those missed instalment at a later date (your final payment date will simply be pushed out for say, three months).

     

    8. R1bn from the Rupert family 

    The Rupert family and Remgro Limited pledged R1 billion towards this financial aid for small business. Business Partners will be administering this under the Sukuma Relief Programme which has two distinct and separate financial aid, namely:

             i.            Formal sole proprietors: R25 000 once off grant per qualifying business to be used to pay for overheads. Must provide evidence of financial activity prior to the COVID-19 outbreak and be both tax and regulatory compliant. Pay-out provided within 7 days of application.

           ii.            Close corporations, companies and trusts: financial aid in the form of an unsecured interest-bearing loan of between R250 000 and R1 million coupled with a non-repayable grant of R25 000 per qualifying business. The loan portion will be interest free for 12 months with no repayment obligations during this period. The loan is repayable after 12 months,  and incurs interest at the prime rate from month 13, once the business is on its feet. The money can be used to cover payroll, rental, and other monthly operating overheads. There is no security requirement for the loan. Once approved, the first payout will be made within 7 working days of your application. Thereafter, the approved financial aid will be disbursed over a period of 3 months, subject to you submitting documents monthly which support your continued need for financial aid.

     

    9.The R1bn Oppenheimer pledge

    The South African Future Trust  (SAFT) was formally established with the initial R1 billion in support from the Oppenheimer family. SAFT will extend direct financial support to SMME employees who are at risk of losing their jobs or will suffer a loss of income because of COVID-19. The SMME (employer) will be liable to repay the interest free loan within 5 years. SMMEs to apply via their regular bank.

    Eligibility criteria:

    • Annual turnover below R25m
    • Trading for at least 24 months
    • Considered a sustainable business on 29 Feb 2020 and adversely impacted by Covid-19.

    Read more about the South African Future Trust

    10. Department of Agriculture, Land Reform and Rural Development [New]

    R1.2bn had ring-fenced for assistance to mainly financially distressed small-scale farmers in certain agricultural sectors.

    The main objective of this support is to complete the current production cycle in an effort to ensure adequate food production and supplies. The targeted beneficiaries are smallholder and communal producers with a turnover between R20 000 and R1 million per annum. 50% women, 40% youth and 6% people with disability will be targeted.  The Funding is a grant and the voucher system will apply in partnership with distributors and manufactures of these inputs and the grant shall not exceed R50 000 per farming operation. See criteria.

    Application close 22 April 2020 4pm.  Apply here.

    11. National Empowerment Fund [New]

    R200m set aside for Black Business to fight COVID-19.

    Department of Trade, Industry and Competition (dtic) in partnership with the NEF call upon black businesses to come forward for funding geared at supporting the manufacture of various medical supplies and the production of food.

    A total R200 million has been set aside for the purpose, and once disbursed black entrepreneurs will be accorded a 12-month repayment holiday to help their businesses stabilize. The loans will be offered at 0% interest for the first year and thereafter at 2.5% per annum. The loans will be repayable over a maximum term of 60 months.

    The NEF says targeted entrepreneurs are those businesses already registered as suppliers with retailers and other institutions in good standing, as well as those that have a purchase order, a contract or letter of intent with a credible entity. The priority product and service list encompasses the following:

    Products to be funded for black entrepreneurs to fight COVID-19: Hand sanitisers, Disinfectants, Hand soaps, Medical protective clothing, Disposable plastic gloves, Facial masks, Detergents / cleansing products, Steel beds, Linen & hospital clothing, Medical supplies, Dispensers (water, soap & sanitisers), Toilet paper, Plastic bottling & moulding, Matrasses & sponges, Disposable caps Alcohol-based wipes.

    Find out more https://www.nefcorp.co.za/covid-19-business-funding/

    R200m

    12. The Giving Hope Foundation [New]

    Willowton Group and Al Baraka Bank have partnered to launch a fund to assist SMMES with loan funding with a combined contribution of R100m. The aim is grow to the fund to R500m with contributions of other corporates and the public.

    Maximum loan amount of R1m to qualifying small businesses. All companies that require loan funding are welcome to apply; however, preference will be given to those that can create jobs in this time, or prove that the funds will be used to preserve jobs.

    There is no restriction on those that can apply. However, businesses must be engaged in providing goods and services that are Sharia-compliant; that is, no enterprises involved in activities such as gambling and the sale of alcohol will be eligible.

    Loans will have a two-year tenure and be interest-free, with no charges levied on the beneficiary or by Al Baraka, which will administer the scheme. Repayments will begin in the second year through equal instalments.

    Applications open 15 April 2020.

    13. Youth Business Relief Fund [New]

    In an attempt to bring relief to the Youth Businesses in the Country, YCCISA has introduced a Relief Fund to assist young people in businesses that are already affected by the corona virus pandemic. The Fund will assist youth entrepreneurs from operational costs, paying labour costs, rental etc.

    For applicants to be considered for the Relief Funding, one MUST:

    • Be a South African citizens.
    • Be 18 to 35 years of age.
    • Have a already existing business.

    Business Categories: All youth businesses are encouraged to apply but mostly informal traders, whom are not included in other rescuing funding methods put on place by government during this time.

    Applications should be forwarded to: (applications@youthbusinessfund.co.za). Apply here

     

    14. SA National Taxi Council R3.6bn fund [New]

    Taxi industry launches R3.5bn Covid-19 relief fund

    The SA National Taxi Council (Santaco), SA’s largest taxi organisation, has launched a R3.5bn fund to cushion the blow of the Covid-19 pandemic on the industry, which transports 16.5-million passengers a day.

    It aims to help 100,000 queue marshals; 150,000 taxi drivers; and the taxi associations’ support staff who work in their offices, “whose livelihoods have been seriously threatened by this virus”.

    Read more

     

    15. NYDA Youth Micro Enterprise Relief Fund [new]

    The National Youth Development Agency has launched the Youth Micro Enterprises Relief Fund (YMERF) aimed at assisting youth-owned enterprises, which might not qualify for other funds. Funding is capped at a once off R10 000. Key criteria include:

    • The enterprise is owned by South African youth (18-35 years old).
    • Enterprise must have been operating for at least 6 months, must show financial statements and bank statements and need to demonstrate how they have been effected by COVID-19.
    • The youth owned enterprise must submit CIPC registration documents except for informal businesses
    • The application period is from 20 April up to 30 May 2020

    Visit NYDA website for information and application process.

    Final words: 

    Stay safe. Stay indoors. Keep motivated. 

    Follow @entrihub on all the main social media platforms to keep up to date with information relating to small business during this crises.