ASSISTANCE AVAILABLE FROM THE SOUTH AFRICAN GOVERNMENT
In light of the national lockdown in South Africa due to the coronavirus pandemic, the Department of Small Business Development has introduced various relief mechanisms for Small, Medium and Micro Enterprises (SMMEs) who have been negatively impacted by COVID-19 to mitigate the financial impact of the virus on SMME businesses. Below we shed some light on some of these mechanisms:
The Debt Relief Finance Scheme:
This scheme will provide SMMEs that are being negatively impacted (either directly or indirectly) by COVID-19 with relief in terms of existing debts and repayments and in particular, rental relief, payroll relief and the payment of operational costs as well as providing assistance with acquiring raw materials, provided that the SMME meets the qualifying criteria set out below.
- The business must have been registered with the Companies and Intellectual Property Commission (CIPC) since at least 28 February 2020
- The business must be 100% owned by South African citizens
- 70% of the employees of the business must be South African citizens
- The business must be registered and compliant with SARS and UIF
- The business must be registered on the National SMME Database, available at http://smmesa.gov.za; and
- The business must submit proof that it is negatively impacted by the COVID-19 virus
In order to benefit under the Debt Relief Finance Scheme, businesses must complete the simplified online application form, which will be made available on Thursday 02 April 2020. In the interim, SMMEs should ensure that they are registered on the http://smmesa.gov.za website.
COVID-19 Temporary Relief Benefit:
An employer who has had to close their business as a result of the COVID-19 pandemic and who can no longer afford to pay their employees, may apply for money from government to assist with salaries. This relief benefit, which is administered by the Unemployment Insurance Fund (UIF), will cover a period of up to three months, and companies will have to prove that their businesses have been severely impacted by the crisis. In the event that a company is still able to pay employees a part of their salary, the Relief Benefit will “top up” these payments, with the maximum benefit being R6730 a month for those employees earning R17 702 or more, per month.
Tax Relief Provided by the South African Revenue Service (SARS):
Treasury has announced that for the next four months, companies with an annual turnover below R50 million and without outstanding tax returns or tax debt can retain up to 20% of the PAYE payment, without facing any penalties or interest. This will subsequently have to be paid back by the company in equal installments, with the first payment expected on 7 September 2020. In addition, provisional taxpayers will only have to pay 15% of the total estimated tax liability for the first provisional tax payment while the second provisional tax payment will be based on 65% of the estimated total tax liability.
These measures have been adopted in order to assist businesses by providing additional cash flow during the COVID-19 pandemic.
Reckless Trading Exemption:
In terms of section 22 of the Companies Act, the CIPC is empowered to issue notices to companies which it has reasonable grounds to believe is trading or carrying on business activity recklessly. The CIPC has stated that this requirement will not apply to companies which have trading difficulties as a result of the COVID-19 pandemic. It is important to note that this is strictly for situations caused by the pandemic and will not cover companies which were in trading difficulties before the pandemic ensued.
Possible Relief from Royalty Payments for Franchisees:
The Small Enterprise Funding Agency (SEFA) have indicated that they are in consultation with the Minister of Small Business Development and has asked whether franchisors would be wiling to waive royalties for franchisees during this time of crisis.
If franchisors confirm their interest, the SMME Relief Fund will make funds available to those franchisors, instead of royalty fee payments being collected from the franchisee.