Coronavirus: 12 measures to ‘cushion’ the economy

President Cyril Ramaphosa says the government has implemented measures to cushion the economy and help ailing businesses as the coronavirus outbreak intensifies. On Monday 23 March, President Cyril Ramaphosa announced at the Union Buildings that businesses affected by coronavirus would not be left out in the cold. This comes after Ramaphosa announced a nationwide lockdown due to the deadly coronavirus pandemic. Besides a Solidarity Fund being set up to which South African businesses, organisations and individuals and members of the international community can contribute to fight the spread of COVID-19, Ramaphosa gave the assurance that businesses will also be given support.

Ramaphosa to the business rescue

Ramaphosa said the following measures will be implemented to help ailing businesses during the coronavirus outbreak:

• Ramaphosa said he is in consultation on a proposal for a special dispensation for companies that are in distress because of COVID-19. Through this proposal employees will receive wage payment through the Temporary Employee Relief Scheme, which will enable companies to pay employees directly during this period and avoid retrenchment;

• Any employee who falls ill through exposure at their workplace will be paid through the Compensation Fund;

• 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;

• Many large companies that are currently closed have accepted their responsibility to pay workers affected. Ramaphosa calls on larger businesses, in particular, to take care of their workers during this period;

• In the event that it becomes necessary, the government will utilise the reserves within the Unemployment Insurance Fund (UIF) system to extend support to those workers in SMEs and other vulnerable firms who are faced with the loss of income and whose companies are unable to provide support. Details of these will be made available within the next few days;

• Using the tax system, the government 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 more than four million workers;

• The South African Revenue Service (SARS) 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;

• 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 more than 75 000 small and medium enterprises;

• Ramaphosa is also exploring the temporary reduction of employer and employee contributions to the UIF and employer contributions to the Skill Development Fund;

• The Department of Small Business Development has made more than R500 million available immediately to assist small and medium enterprises that are in distress through a simplified application process;

• 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; and

• The Department of Tourism has made an additional R200 million available to assist SMEs in the tourism and hospitality sector who are under particular stress due to the new travel restrictions.

Debt relief fund for small businesses 

A Debt Relief Fund to help alleviate the economic impact of the coronavirus on small businesses in South Africa is due to come into operation on Tuesday 24 March. All small, micro and medium enterprises (SMMEs) may apply for relief on existing debts and payments. In order to be eligible, all applicants will be required to show an impact, or potential impact, of the virus on their business.

“This facility will also assist entities to acquire raw material, pay labour and operational costs. All these interventions will be structured to match the patterns of the SMME’s cash flows, as well as the extent of the impact suffered,” said Small Business Development Minister Khumbudzo Ntshavheni.

The fund is being established and administered by the Department of Small Business Development. According to the department, it has been “inundated” by enquiries from SMMEs about measures that could help them mitigate the enormous impact being felt by their businesses. Organisations wanting to apply for assistance from the Debt Relief Fund must register on the SMME South Africa portal at www.smmesa.gov.za so that a database can be created. The portal will become operational on Tuesday 24 March.

“The department’s insistence on the use of the database is based on the need to track, monitor and strengthen the impact of business development support to SMMEs by both government and the private sector, during this period and beyond,” Ntshavheni said.

“In future, the database will also be used to apply for both financial and non-financial support, access information about business opportunities and market access support,” she added.

Coronavirus: ‘Distressed’ companies

Employment and Labour Minister Thulas Nxesi said individual companies in South Africa are becoming “distressed” due to the coronavirus and so the department has come up with a few measures to relieve some of the pressure. Nxesi said that in order to assist the distressed companies, a period of reprieve will be considered in order for companies not to contribute to the UIF. He said the Funds Temporary Employer/ Employee Relief Scheme will also be used to ensure that workers are not laid off.

“In instances where companies decide to close for a short period as a precautionary measure, the short-term UIF benefit will kick in. If a company contemplates a short term shut down, they are required to inform the Unemployment Insurance Fund. Our team will visit these companies to provide assistance with the processing of the claims,” said Nxesi.

In instances where an employee has to be self-quarantined for 14 days due to the coronavirus, such leave will be recognised as a special leave which will be fully paid on condition that the reason for the quarantine meets the requirements and that an employee can apply for UIF benefits. In an event that an employee is required to be quarantined for longer than 14 days as a result of having travelled or been in contact with an infected person, such a leave will be recognised as special leave and that employee will be eligible to apply for unemployment insurance benefits. Source: The South African Read More