1. What This Faq Sheet 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 Solidarity Fund here.
This is what we know so far.
The Trade and Industry Minister Ebrahim Patel has described the Solidarity Fund as follows: ‘It’s designed to unite the nation and accelerate the country’s response to COVID-19. The focus of the fund is in four areas – it’s to alleviate the suffering and distress caused by the virus to the country and to mobilise the support of business and civil society in support of government’s effort’.
‘The fund, kick-started by donations of R1 billion each from the Rupert and Oppenheimer families, is intended to help mobilise business and civil society to back government efforts to contain the spread of COVID-19.’
No specific criteria have been issued for how and who can apply for assistance from the Solidarity Fund yet. We are sure that this will change in the coming days.
3. The SMME Debt Relief fund
3.1. What is the SMME Debt Relief Fund?
The Department of Small Business Development has made R500 million available for small, micro and medium enterprises.
Here is a link to an interview with the Chief of Staff at the Ministry of Small Business Development, Sarah Mokwebo. She specifically stated that they will look at industries such as tourism, which is going to be the hardest hit.
3.2. Who qualifies?
There is some uncertainty about what businesses fall in the category of an SMME and will qualify for debt relief. When in doubt, apply anyway. If you have fewer than 100 employees or an annual turnover of less than R20 million or a gross asset value of less than R5 million, you should qualify for assistance.
A rumour has been going around that only 51% black-owned businesses will qualify. This is not correct. You will have to submit your B-BBEE certificate with your application.
3.3. How do you apply?
You can apply here.
4. Department of Tourism relief fund: What is it and who qualifies?
You can read more about the Department of Tourism’s Relief Fund in a formal statement on the Department’s website here.
The Department has made R200 million available to assist SMMEs in the tourism and hospitality sector who are under particular stress due to the restrictions placed on travel.
4.1. What types of businesses qualify 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?
Businesses must also meet the following criteria:
- must be a formally registered business with the 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 outlined 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 too much about this, travel agents are covered.
- must be in existence for at least one business financial year,
- must 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 statements, balance sheet, income statements, cash flow statements,
- indicate the intended use of the resources.
4.3. How do you apply?
No official information on how to apply has been released yet.
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. Temporary employer/employee relief scheme (TERS)
6.1. What is TERS?
There is also the Temporary Employer/Employee Relief Scheme (TERS) which is being administered by the Department of Labour and Employment. In terms of the TERS process, the Unemployment Insurance Fund (UIF) may fund distressed companies directly in order to prevent retrenchments.
Here is an ‘easy aid’ to understanding TERS. Bear in mind that it was not created with COVID-19 in mind, so we expect to see some changes to the process.
6.2. What are the requirements?
The distressed company will only be funded if it meets these requirements:
- The distressed company is able to demonstrate that it has been compliant with UIF legislation;
- If not compliant, the distressed company must undertake to pay outstanding contributions and bring its declarations up to date within a stipulated timeframe
- The distressed company must be able to demonstrate that it will/or has embarked upon a turnaround or sustainability programme which will result in job preservation at the expiry of the funding agreement;
- The requirement is that you must prepare a turn-around strategy and implementation plan.
- The distressed company will be able to meet its obligations in relation to the UIF legislation.
Here are the terms & conditions of TERS which explains the scheme in a lot of detail.
6.3. How to apply?
The application form can be found here, it is called the ‘TERS – Request to Participate May 2019’ form.
7. What other assistance is available for businesses that are in distress?
In his speech on 23 March 2020, President Ramaphosa announced these relief measures as part of the COVID-19 economic stimulus package.
We don’t have a lot of information on these interventions yet, but are closely monitoring the situation.
For now, here is what the President said in his speech.
7.1. A tax subsidy for employees
‘Using the tax system, we will provide a tax subsidy of up to R500 per month for the next four months for those private sector employees earning below R6 500 under the Employment Tax Incentive. This will help over 4 million workers.’
7.2. Accelerated payment of employment tax incentive reimbursements
‘The South African Revenue Service will also work towards accelerating the payment of employment tax incentive reimbursements from twice a year to monthly to get cash into the hands of compliant employers as soon as possible.’
7.3. Deferred payment of PAYE and provisional corporate income tax
‘Tax compliant businesses with a turnover of less than R50 million will be allowed to delay 20% of their pay-as-you-earn liabilities over the next four months and a portion of their provisional corporate income tax payments without penalties or interest over the next six months. This intervention is expected to assist over 75 000 small and medium-term enterprises.’
7.4. Temporary reduction in contributions to UIF and the Skills Development Fund
‘We are exploring the temporary reduction of employer and employee contributions to the Unemployment Insurance Fund and employer contributions to the Skills Development Fund.’
7.5. Industrial funding from the Industrial Development Corporation
‘The Industrial Development Corporation has put a package together with the Department of Trade, Industry and Competition 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.’
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.’
These banks have so far made announcements regarding debt 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.
Please click here to view the FAQ.