Tax holidays to R500m fund: COVID-19 relief measures for SA small businesses

Image credit: Twitter/Dept of Small Business Development

The government has announced several relief measures for small, micro and medium-sized enterprises (SMMEs) that may be hit hard by the COVID-19 pandemic.

We outline some of them in this article, including the privately managed Solidarity Fund that President Cyril Ramaphosa announced in his address to the nation on Monday (23 March).

R500m SMME Support Intervention

In his address, Ramaphosa said, “The Department of Small Business Development has made over R500 million available immediately to assist SMEs that are in distress through a simplified application process.”

The Department has since launched an SMME Support Intervention, which consists of a Business Growth/Resilience Facility and a Debt Relief Fund.

The Business Growth/Resilience Facility will fund working capital of SMMEs operating in the supply value chain, particularly those that “manufacture (locally) or supply various products that are in demand emanating from current shortages due to COVID-19 pandemic.”

The Debt Relief Fund is aimed at providing relief on existing debts and repayments for SMMEs negatively impacted during this period.

Both the Facility and Fund will support SMMEs at an interest rate of prime minus 5%, which currently translates to 3.75%.

To qualify, SMMEs must be 100% owned by South African citizens and must employ at least 70% South Africans. Priority will be given to businesses owned by women, youth and people with disabilities. The businesses must also be SARS-compliant.

SMMEs requiring assistance will have to register on the SMME South Africa platform – http://www.smmesa.gov.za – which went live on Tuesday, 24 March.

Tax holidays, wage support and industrial funding

Wage support: Ramaphosa also announced that the government is considering a Temporary Employee Relief Scheme, which will enable distressed companies “to pay employees directly during this period and avoid retrenchment.”

On tax holidays, the President said, “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.”

Those companies will also delay a portion of their provisional corporate income tax payments without penalties or interest over the next six months. SARS is expected to release details on these measures on its website.

With regard to industrial funding, the Industrial Development Corporation (IDC) and the Department of Trade, Industry and Competition have prepared a R3 billion package for vulnerable companies.

The package will also be used to fast-track financing for companies whose services are critical in the COVID-19 response. More details are available on the IDC’s website here.

R200m for tourism SMEs

On Tuesday, Tourism Minister Mmamoloko Kubayi-Ngubane said R200 million has been set aside for SMEs in the tourism and hospitality sector which are affected by the travel bans.

To qualify, companies will need to have an annual turnover of less than R2.5 million and have been in business for at least one year.

Furthermore, they should show that they were not in distress before the COVID-19 pandemic and should be tax compliant and fully registered with the CIPC. The usual black empowerment regulations will also apply.

Solidarity Fund

President Ramaphosa also announced a Solidarity Fund, which will be used to support small businesses among other interventions.

The government has provided R150 million seed capital, with the private sector and individuals expected to donate as well.

It is understood that the donations by the Rupert and Oppenheimer families of R1 billion each are separate from this Fund and will be used to “assist small businesses and their employees affected by the coronavirus pandemic.”

Banks offer 3-month payment holidays

Small businesses can also benefit from three-month debt payment holidays offered by Standard Bank that start from 1 April.

In an update, the Bank said, “We will set up automatic new payment terms for all our clients with a turnover of less than R20 million per annum, who are up to date with their payments as at the end of March 2020 and are in good standing with Standard Bank.”

Nedbank also announced similar debt relief measures and other banks are expected to do so as well.

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