Assistance Available from the South African Government
In light of the COVID-19 national lockdown in South Africa, the Department of Small Business Development has introduced various relief mechanisms for Small, Medium and Micro Enterprises (SMMEs). These relief measures aim to support businesses that have been negatively impacted by COVID-19 in addition to mitigating the financial impact the virus has inflicted 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 particularly rental relief, payroll relief and the payment of operational costs as well as assisting with acquiring raw materials, provided that the SMME meets the qualifying criteria set out below.
Qualifying Criteria for the Debt Relief Finance Scheme:
The business is registered with the South African 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 has been negatively impacted by the COVID-19 virus.
Application Process for the Debt Relief Finance Scheme:
To benefit under the Debt Relief Finance Scheme, a business must complete the simplified online application form, which will be made available on Thursday 2 April 2020. In the interim, SMMEs should ensure they have registered on the http://smmesa.gov.za website.
COVID-19 Temporary Relief Benefit
An employer who has had to close their business because of the COVID-19 pandemic and who can no longer afford to pay their employees may apply for money from the government to assist with salaries. This relief benefit administered by the Unemployment Insurance Fund (UIF) will cover a period of up to three months. Companies will also be required to prove that their businesses have been severely impacted by the COVID-19 crisis to be eligible for this assistance. If a company can 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 instalments, 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 and the second provisional tax payment will be based on 65% of the estimated total tax liability.
These measures exist to assist businesses by providing additional cash flow during the COVID-19 pandemic.
Reckless Trading Exemption
According to section 22 of the Companies Act, the CIPC may issue notices to companies for which it has reasonable grounds to believe are trading or carrying on business activity recklessly. The CIPC has stated that this requirement will not apply to companies that have experienced trading difficulties due to 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 experienced 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 willing to waive royalties for franchisees amid the crisis.
If franchisors confirm their interest, the SMME Relief Fund will make funds available to franchisors instead of royalty fees being collected from the franchisee.
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