1. WHAT THIS FAQ IS ABOUT & HOW WE WILL UPDATE IT
In this document we will keep track of the most recent developments on the economic support provided by the Government.
We will update the FAQ as more information becomes available. We will send out an ASATA Alert and do a post on the ASATA Coronavirus website with details of the update.
There is a separate FAQ on employment law, options and strategies to protect your business and your employees.
2. The solidarity fund: What is it and how can you access it?
You can read more about the Solidary Fund here. The aim of the fund is to
- prevent the spread of the disease by supporting measures to flatten the curve and lower infection rates
- detect and understand the magnitude of the disease
- care for those in hospital or medical care
- support those whose lives are disrupted by the pandemic.
Individuals and organisations are invited to support these efforts through secure, tax-deductible donations.
SMMEs can gain access to funding as follows:
2.1. Access to the Sukuma Relief Programme through Business Partners
The R1-billion that was pledged by the Rupert family will be administered and distributed by Business Partners. The Sukuma Relief Programme will have two separate offerings for formal sole proprietors and other business entities such as companies, closed corporations and trusts.
What relief is available for sole proprietors?
The programme offers sole proprietors a grant of R25 000 to be used to pay for overheads. You must be able to provide evidence of financial activity prior to the Covid-19 outbreak and be tax and regulatory compliant. The grant will be paid in one single payment within 7 working days. You can apply online here.
What relief is available for business entities?
Companies, trusts and closed corporations can apply for an unsecured interest-bearing loan of between R250 000 and R1 million coupled with a non-repayable grant of R25 000. The loan will be interest free for twelve months with no repayment obligation during this period. The loan is repayable after 12 months and will bear interest at the prime rate. The money can be used for payroll, rental, and other monthly operating overheads.
The business must be formally registered, provide evidence of financial viability prior to the Covid-19 outbreak, and be both tax and regulatory compliant. The first payment will be made within 7 working days, and the balance will be distributed over a period of 3 months. You will have to submit documents each month to support the continued need for financial aid during these 3 months. You can apply online here.
The Sukuma Relief Programme have been overwhelmed with applications far exceeding the R1 billion capital available and has called for additional funding. On 13 April the programme announced that it would start dispersing funds in the form of grants and loans to SMMEs within a few days.
2.2. Access to the Oppenheimer SA Future Trust through your bank
The SA Future Trust have made funds available to South African businesses impacted by the Covid-19 pandemic.
The scheme is currently available to clients of Nedbank, Standard Bank, FNB and ABSA. SMMEs can apply through their main bank. The funds will be distributed as interest-free loans over a five-year term. The aim is to help SMMEs who are suffering from short-term cashflow constraints to continue operations and retain employees.
- Annual turnover below R25 million
- Must have been trading for at least 24 months
- The business must have been sustainable at 29 February 2020
- The business must be adversely affected by the Covid-19 pandemic
You will need:
- Company or CC registration number, Master’s reference number for Trusts, or ID number and address for sole proprietors
- PAYE number
- Income tax number
- Confirmation of employment status of emplyees
The Debt Relief Finance scheme
2.3. What is the SMME Debt Relief Finance Scheme?
The Department of Small Business Development has established the Debt relief Finance Scheme. The Scheme will provide soft loan funding to keep existing businesses afloat during the Covid-19 pandemic for 6 months from April 2020. It is aimed at businesses which are negatively affected, directly or indirectly, due to the Coronavirus pandemic. Priority will be given to businesses owned by women, youth and people with disabilities.
For more information you can contact the Department of Small Business Development at email@example.com or on their hotline: 0860 663 7867.
On 10th April, the Minister of Small Business Development announced that over 100,000 SMMEs had applied to this scheme for relief funding and that the first batch of funding was expected to be rolled out from the following week.
2.4. What are the funding terms?
These are the funding terms:
- The facility will offer working capital only. Strictly direct costs which are auditable.
- A maximum of R500 000 per SMME will be considered depending on requirements.
- The term of the funding will be determined by the business cash flow.
- Loan facilities will be at an interest rate of Prime less 5%.
2.5. Who qualifies?
These are the qualifying criteria:
- The business must have been registered with CIPC by at least 28 February 2020
- The company must be owned by 100% South African Citizens
- Employees must be 70% South Africans
- The company must be registered and compliant with SARS and UIF. Seda will assist micro-enterprises to comply. A request for assistance must be emailed to firstname.lastname@example.org.
- The company must register on the National SMME Database at hhtps://smmesa.gov.za
- Provide proof that the business is negatively affected by the Covid-19 pandemic
- Complete the online application form
- Provide statutory company documents
- Provide FICA documents (e.g. municipal accounts, letter from traditional authority)
- Certified copies of IDs of directors
- 3 months’ bank statements
- Latest annual financial statements or latest management accounts not older that 3 months (where applicable)
- Business profile
- 6 months’ cash flow projections (where applicable)
- Copy of lease agreement or proof of ownership if applying for rental relief
- If applying for payroll relief, the details of employees as registered with the UIF and banking details. Payroll payments will be made directly to employees.
- Facility statements of other funders
- A detailed breakdown of funds including salaries, rent etc.
2.6. How do you apply?
- You must follow these steps to apply:Register on https://smmesa.gov.za/
- Complete the online application form which is now available at the above website.
- Upload the required supporting documents.
3. Business growth/resilience facilities
The Department of Small Business Development has established Business growth/Resilience Facilities. This facility will fund the following:
- Production/supply of health care and related products that will be utilised to combat the spread of the Covid-19 pandemic.
- Local production/manufacturing/supply of various products that will be required by the country emanating from a shortage due to the Covid-19 pandemic
Priority will be given to businesses owned by women, youth and people with disabilities.
4. Department of Tourism fund: What is it and who qualifies?
The Department has made R200 million available to assist SMEs in the tourism and hospitality sector who are under particular stress due to the restrictions placed on travel. The Department has specified that funding is capped at R50,000 for each individual entity who is awarded funding through this scheme. On 30 May the Department also announced that a further R30 million will be made available to assist tour guides during lockdown.
4.1. What type of businesses qualifies for assistance?
Travel agents and tour operators qualify. Here is the full list of businesses mentioned in the formal statement.
- Accommodation: Hotels, resort properties and 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.
From the rest of the statement, it looks like the fund is available for businesses who fall under the Tourism B-BBEE Sector Code. The full list is in section 9.
4.2. What are the other criteria?
The business must also meet the following criteria:
- Must be a formally registered business with Companies and Intellectual Property Commission (CIPC),
- turnover must not exceed R2.5 million per year,
- must have a valid tax clearance certificate,
- guaranteed employment for a minimum number of staff for a period of 3 months,
- proof of minimum wage compliance,
- must provide proof of UIF registration for employees employed by the business,
- be an existing tourism-specific establishment as outline in the scope of application (suppliers and intermediaries are not eligible),
We are not sure what the Department of Tourism meant by this. We can only assume that they are referring to the scope of application section in the Tourism B-BBEE Sector Code. Don’t worry to much about this, travel agents are covered.
- must be in existence for at least one business financial year,
- prove that the relief is required as a result of the impact of COVID-19,
This should not be difficult given the travel restrictions. We think that what they mean is that the business must otherwise have been in good financial health.
- must submit statements of financial position, including over 12 months’ bank statement, balance sheet, income statements, cash flow statements,
- indicate the intended use of the resources.
4.3. How do you apply?
4.4. Funding for tourist guides
On 30 May the Department announced that they are making a further R30 million available as financial relief for tourist guides during lockdown. The beneficiaries of this scheme include tour guides who are registered in terms of the Tourism Act, freelancers and independent contractors.
Tour guides do not have to apply. The Department will source information from the databases maintained by the Provincial Registrars of Tourist Guides in all nine provinces.
5. COVID-19 Small Business Relief Centre
The National Small Business Chamber has launched the COVID-19 Small Business Relief Centre. You can sign up for free for ongoing tips, news and support. They will also campaign on your behalf to encourage providers to implement:
- low-interest disaster recovery loans,
- moratoriums on vehicle and equipment leases, bond repayments etc,
- negotiating and staying in contact with suppliers,
- landlord negotiation with regard to property leases.
Here is an interview with Mike Anderson, the CEO of the National Small Business Chamber.
6. Corona virus Temporary employer/employee relief scheme (covid19TERS)
6.1. What is TERS?
There is also the Corona Virus Temporary Employer/Employee Relief Scheme (COVID19TERS) which is being administered by the UIF.
Employers that have to enforce lock down and who require financial assistance from the UIF can access information about available funding through a dedicated mailbox: email@example.com. You will receive an automated response outlining the procedure and documents required to process an application.
Here is an ‘easy aid’ to understanding COVID19TERS. The UIF also has a hotline number: 012 337 1997 for COVID19TERS benefit enquiries. Read more about how to qualify for Covid-19 TERS and the claims process in our Labour Law FAQ.
7. What other assistance is available for businesses that are in distress?
President Ramaphosa announced these relief measures as part of the COVID-19 economic stimulus package.
The Ministry of Finance released a media statement and draft explanatory notes on Covid-19 tax measures on 29 March. These tax measures will take effect from 1 April 2020 and are regulated in terms of the proposed Disaster Management Tax Relief Administration Bill. SARS has published an explanatory memorandum [ILH5] in the revised draft of the Tax Relief Bill on 19 May. Additionally, the Government gazetted a Notice on Expanding Access to Living Annuity Funds on 1 June.
7.1. An expansion of the Employment Tax Incentive scheme
Government has proposed to expand the existing Employment Tax Incentive programme from 1 April 2020 until 31 July 2020. Employers can claim an additional R750 per qualifying employee during this time. The calculations are explained in this User Guide and FAQs published by SARS.
These tax incentives will be paid monthly.
These are the compliance requirements to qualify for the Employment Tax Incentive scheme:
- Employers must be registered with SARS by 1 March 2020;
- Employers must be up to date with tax return submissions; and
- Employers must not have outstanding tax debt.
7.2. Deferred payment of PAYE
Government proposed the following tax measures for tax compliant businesses with an annual turnover of less than R100 million beginning 1 April 2020 to 31 July 2020:
- Deferral of payment of 35% of the PAYE liability, without SARS imposing administrative penalties and interest for late payment.
- The deferred PAYE liability must be paid to SARS in equal instalments over the six month period commencing on 1 August 2020, i.e. first payment must be made on 7 September 2020.
This proposal will not apply to employers that:
- has failed to submit any tax returns
- has an outstanding tax debt
The Employers’ Covid-19 Tax Relief User Guide has more details.
7.3. Deferred payment of provisional tax liability
The Government proposed the following tax measures for tax compliant businesses with an annual turnover of less than R100 million) beginning 1 April 2020 to 31 March 2021:
- Deferral of a portion of the payment of the first and second provisional tax liability to SARS, without SARS imposing administrative penalties and interest for pate payment of the deferred amount.
- The firsts provisional tax payment due from 1 April 2020 to 30 September 2020 will be based on 15% of the estimated total tax liability.
- The second provisional tax payment from 1 April 2020 to 31 March 2021 will be based on 65% of the estimated total tax liability.
- The full tax liability must be paid with the third provisional tax payment in order to avoid interest charges.
This proposal will not apply to employers that:
- has failed to submit any tax returns
- has an outstanding tax debt
The eligibility criteria for sole proprietors still has to be finalised.
7.4. Skills Development Levy payment holiday
Employers who are registered for SDL do not have to declare and pay SDL to SARS from May to August 2020.
7.5. Other new tax relief measures announced on 23 April
These additional measures were announced :
- Fast-tracking of value-added tax (VAT) refunds;
- Three-month deferral for filing and first payment of carbon tax liabilities;
- A deferral for the payment of excise taxes on alcoholic beverages and tobacco products:
- Postponing the implementation of some Budget 2020 measures:
- A case-by-case application to SARS for waiving of penalties;
- Increasing the deduction available for donations to the Solidarity Fund; and
Adjusting pay-as-you-earn for donations made through the employer.
7.6. Temporary relief from Pension Fund Scheme Contributions
- The Financial Sector Conduct Authority (FSCA) has announced that employers who are in financial distress due to the Covid-19 pandemic and are unable to pay their full contributions to employee retirement funds, have been given a temporary reprieve.
- If these employers urgently reach agreement with the specific retirement funds on rules to deal with the temporary suspension or postponement of payments, and submit these rules without delay to the FSCA, these employers will not face prosecution for non-compliance in terms of the Pension Funds Act, 1956.
- The communication issued by FSCA can be found here.
7.7. Expanded access to living annuity funds
This measure will result in individuals who receive funds from a living annuity being temporarily allowed to immediately either increase (up to a maximum of 20 percent from 17.5 percent) or decrease (down to a minimum of 0.5 percent from 2.5 percent) the proportion they receive as annuity income. This will assist individuals who either need cash flow immediately or who do not want to be forced to sell after their investments have underperformed. Please see this official statement by the Government for more information.
7.8. Industrial funding from the Industrial Development Corporation
The Industrial Development Corporation has published information about its interventions in response to Covid-19. 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
7.9. South African Government COVID-19 Economic Stimulus Package
On 21 April President Ramaphosa announced a R500 billion stimulus package for the South African economy. More specific details will be released in the coming weeks, but what details are available have been summarised below.
The 2020/21 Budget has been re-worked to accommodate the problems stemming from the COVID-19 pandemic. Therefore, the main funding streams for this stimulus package are re-prioritised expenditure from other areas of the previous budget, the UIF, other local sources and global partners or other international organisations such as the World Bank and the International Monetary Fund.
R200 billion has been earmarked for a loan guarantee scheme for businesses with an annual turnover of less than R300 million. This scheme is in partnership with major banks, Treasury and the South African Reserve Bank. On 12 May the Government announced the official opening of this loan scheme, and that the. initial set of participating banks (Absa, First National Bank, Investec, Mercantile Bank, Nedbank and Standard Bank) are ready to accept loan applications from eligible businesses which bank with them. More information on this loan scheme can be found through the above listed banks, and in this official guide published by the Government.
The rest of the funding is being prioritised for municipalities, extra social security assistance, R40 billion has been set aside for businesses who cannot pay their staff and R100 billion has been prioritised for job protection and job creation.
On 24 June the Finance Minister announced the revised National Budget for the Financial Year 2020/2021. Here, the government made provision for an additional R34.1 billion on expenditure for healthcare and R25.5 billion allocated to the Social Development Department to support the most vulnerable and destitute via the Special Relief of Distress grant. R100 billion expenditure has been allocated to address the increasing unemployment problem in South Africa. No additional sector-specific bail-out schemes were announced which relate directly to the tourism and travel industries.
8. Will there be debt relief for businesses from private banks?
In his speech on 23 March 2020, President Ramaphosa said the following:
‘Commercial banks have been exempted from provisions of the Competition Act to enable them to develop common approaches to debt relief and other necessary measures.’
Banking Association of South Africa members have agreed to do all in their power, while operating within regulatory frameworks, to responsibly support their customers and preserve the safety and soundness of our financial system. It was collectively decided that Saswitch fees will be waived during lockdown.
These banks have so far made announcements regarding debt relief:
- Standard Bank – https://www.standardbank.co.za/southafrica/personal/campaigns/covid-19
- Nedbank: – https://www.nedbank.co.za/content/nedbank/desktop/gt/en/info/campaigns/pr-holding-statement.html
- FNB – https://www.fnb.co.za/realhelp/
- ABSA – https://www.absa.co.za/personal/covid-19/
- Wesbank – https://www.wesbank.co.za/manage-account/payment-relief
9. WHAT RELIEF IS AVAILABLE FOR BIG BUSINESSES?
We realise that a lot of these interventions are aimed at propping up SMMEs and that large businesses will feel over-looked. The information is still coming in and ASATA is closely monitoring what the Government is doing and will provide regular updates.
10. What should ASATA members be doing right now?
In addition to keeping tabs on the Government interventions discussed above, ASATA members are encouraged to take the following actions to preserve their cash flow in the short term:
- Consider our employment FAQ for options such as short time and temporary lay-offs. This is the single biggest cost saving measure you can employ now.
- In extreme cases, consider whether you shouldn’t close your business temporarily.
- Apply for the Temporary Employer Relief Scheme. In order to do this, you will have to create a turnaround strategy and implementation plan. You should start that immediately.
- Speak to your banks regarding debt relief measures and short-term financing options.
- Speak to your landlords regarding deferred payment of leases.