Government help to SMMEs struggling because of COVID
These are very challenging times for small and mediums sized entities globally and in South-Africa. Businesses need money to keep their doors open. President Cyril Ramaphosa announced on Monday, 23 March 2020, that South-Africa will enforce a twenty-one-day lockdown over coronavirus. "The action we are taking now will have lasting economic costs," said Ramaphosa. "But we are sure that the cost of not acting now will be far greater."
Restaurants, retail stores and other firms have been ordered to shut down, employees are being forced to work from home, supply chains are disrupted, and orders are drying up. Many of our clients are concerned as to whether or not their businesses will get through this pandemic as no one knows how long the economic situation will last.
There appears to be a light at the end of the tunnel. Small businesses struggling in the wake of Covid-19 can apply for government assistance as of 24 March. There are two ways that businesses may apply for relief on existing debts and payments:
- A Debt Relief Fund
- Business Growth Fund
The Debt Relief Fund is aimed at alleviating the economic impact of the coronavirus by offering small, micro and medium enterprises (SMMEs) a 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. Some of the details which companies are required to share include:
- Annual turnover;
- Shareholders (including current BEE standing);
- Number of employees;
- Employee demographics;
The Business Growth Fund will offer working capital, stock, bridging finance, order finance and equipment finance, and the amount provided will be based on the funding needs of the business.
It is important to note that all applicants for the Debt Relief Fund and the Business Growth/Resilience Fund should register at www.smmesa.gov.za from Tuesday.
Other Business Rescue measures that has been implemented include:
- 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;
- In the event that it becomes necessary, 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 loss of income and whose companies are unable to provide support.
- Using the tax system, 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.
- 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.
There is no sugar coating it: this is a bad situation. Recovering from the economic impact of this virus will be hard and painful. Your goal as a business owner is now to conserve cash. Ask your larger suppliers and vendors for help. Ask landlords to defer payments. You will be encouraged by their response. They want to keep you in business as much as you do. This situation will not last forever. Things will turn around.
Let us help you weather the storm. You can contact your local PKF office or partners to discuss options with them.