Dear Community members
Financial Relief during COVID-19
It is one month since the first COVID-19 person was diagnosed in South Africa and since then we have gone through a whirlwind of emotions, including stress and anxiety.
One of the areas causing great concern for all South Africans is the pressure that the lockdown has had on businesses and the resultant financial concerns.
In the coming weeks our community will announce support mechanisms to assist you at this challenging time.
At this point, we would like to summarise for you some of the governmental relief mechanisms that have been put in place to assist South Africans.
If you are feeling overwhelmed and confused by the application processes for these initiatives, help is at hand. ORTJet have offered to provide guidance in preparing and submitting the necessary applications and documentation. To connect with an ORTJet mentor contact helene@ortsa.org.za. |
UIF (please see below further information on UIF benefits)
The UIF has an estimated surplus of R180 billion and this is the logical first port of call when looking at assistance, especially as money given by the UIF is not a loan, and thus doesn’t have to be repaid. There are two routes to access this money:
- The traditional UIF method (National Disaster Benefit)
- The new Temporary Employer/Employee Relief Scheme (TERS) which is discussed below.
For either method, the employer must be registered with the UIF and be making monthly contributions. If you are behind on contributions, you can pay in any backlog you have.
The Department of Small Business Development (DSBD)
R500 million has been set aside to help SMMEs due to the impact of the coronavirus. The money will be in the form of loans at prime less 5%. Assistance falls into two categories:
Business Growth/ Resilience Facility: This applies to businesses whose products are aligned to helping to combat the pandemic. Examples are making hand sanitisers, medical protective clothing, medical supplies etc. SMME logistics companies may also apply for funding.
Funding will cover bridging finance, asset finance, stock and working capital needs.
Debt Relief Fund: Companies will need to show how the coronavirus has impacted on their business. The relief focuses on purchase of stock and other operating needs. Funds will be released based on the company’s cash flow requirements.
The starting point is to register on the DSBD’s portal (www.smmesa.gov.za) – the registration entails staff breakdown between males and females, the number of youth employees and racial classification of staff. There is also a section on who owns the business and annual turnover. The business needs to be 100% South African owned and the work force is to be 70% local.
The DSBD is setting up an SMME database which will be used in future interventions.
Once registered follow the application process which opens on 2 April. How much each business gets is still unclear.
Call the DSBD’s hotline 0860 663 7867 or email info@dsbd.gov.za to check what kind of government support you qualify for.
Department of Trade and Industry
R3 billion assistance has been set aside with a main focus on providing funding to “vulnerable” businesses and to provide financing help to companies involved in the battle to roll back the coronavirus. It’s not that dissimilar to the DSBD’s approach but it serves all business, not just SMMEs. Of the R3 billion, R500 million will be for importing needed medical products and R700 million will be for financing equipment and working capital requirements. Guidelines as to how to apply are forthcoming.
The Solidarity Fund
This has been set up with R150 million from the government (www.solidarityfund.co.za) and it is designed to help stop and detect the virus, look after the people with it, plus help those people who are vulnerable as a result of the coronavirus. Mary Oppenheimer has pledged R1 billion to this fund and Naspers has committed R500 million. You may wish to donate to the fund or apply for help for struggling staff members.
Private and Corporate Funds
The Rupert and Oppenheimer families and the Motsepe Foundation, have each pledged R1 billion. Motsepe’s money will go towards helping poor communities fight the coronavirus by supplying them with hand sanitisers etc. The Ruperts’ and Oppenheimers’ funds will be to help struggling small businesses and employees, as a result of the coronavirus. In addition, Naspers has pledged R1.5 billion (in addition to the R500 million to the Solidarity Fund) to source medical supplies and protective equipment, from China, for health care workers.
The Rupert funds will be disbursed by Business Partners, and application forms will soon be released - although details are not yet available, the money will be a loan.
The Oppenheimer money will be paid out from the “South Africa Future Trust” through the major four banks in the form of a five-year interest free loan – for details see SAFT’s website. SMMEs will apply to their bank which will then pay salaries directly into employees’ bank accounts. No liability will be incurred by employees – the business will be liable for repayment. Speak to your bank manager for how to apply – the system begins operating on 3 April. Still awaiting details on the Motsepe and Naspers disbursements.
SARS Relief Measures
The Employment Tax Incentive (ETI) has been extended to include all staff earning less than R6 500 per month from ages 18 to 65 – they will qualify for an additional R500 per month which can be claimed via the monthly PAYE return. All staff members currently receiving ETI benefits will get an additional R500 per month. These measures will apply for four months from April to July this year. The ETI has been paying out twice a year but this will now be monthly.
Tax compliant companies with turnover of less than R50 million will be able to hold back 20% of their PAYE payments and a portion of their provisional tax payments, as follows:
The business must be tax compliant and using eFiling.
PAYE
PAYE returns due May 7, June 7, July 7 and August 7, you only pay 80% of your PAYE liability.
From September 7 and for the next five PAYE returns, the 20% reduction is to be paid back in equal amounts e.g. if you received a R30 000 reduction in PAYE for the months April to July, then you will repay an additional R5 000 each month on your PAYE return.
Provisional Tax payments due from April 1 to September 30:
The first payment at 15% of the estimated tax liability
The second payment at 65% of estimated tax liability (i.e. 50% is due on the second payment). In your top up payment you will be required to pay your full tax liability. Note: the above applies to companies – measures for individuals will be announced later.
VAT
No relief has been outlined for late VAT payments but requests for relief from penalties and interest will be considered by a SARS committee on a case by case basis.
Competition Act amendments re banks and retail tenants
The Competition Act has been amended to allow banks to work together to come up with solutions to help indebted companies and people. The major banks have announced cash flow relief measures – these will have to be repaid. Speak to your bank for more details and see a summary of bank-by-bank relief as announced to date here https://www.businessinsider.co.za/all-the-help-south-african-banks-are-offering-consumers-during-covid-19-2020-4
The Competition Act has also been relaxed to allow retail tenants to get together and present a unified negotiating position to landlords in the areas of evictions, rental discounts and rental “holidays”. This is already happening with “active” negotiation and demands between retail landlords and tenants.
Tourism sector relief
A R200 million fund has been set up to help SMMEs in the tourism sector. It applies to SMMEs with R2.5 Million or less. 70% of pay outs will be to Black owned Businesses with a bias towards rural areas.
UIF (further information)
- National Disaster Benefit
1.1 Temporary shut down
If the employer temporarily shuts down the business, then the UIF will pay out R3 500 per employee per month for up to three months.
Requirements: A letter from the employer confirming the operation is temporarily closing down due to the coronavirus and a copy of the employee’s ID
Forms to be Completed:
UI19 and UI12.7 (employer to complete)
UI2.1 - application form
UI2.8 – Confirmation of bank account
1.2 Reduced work time
The pay-out is the difference between what the employer pays and UIF benefits.
Forms to be completed:
UI19 and UI2.7 (completed by Employer)
UI 2.1 (application)
UI 2.8 (bank form completed by the bank)
A letter from the Employer confirming Reduced Work Time is due to the coronavirus and a copy of the ID document
1.3 Quarantine and illness
In cases where employees are put in isolation for 14 days or more.
Requirements:
Letters from the employer and employee that the person is in quarantine. No medical certificate is needed. If the quarantine is longer than 14 days, a certificate is required from the employee’s doctor, along with the form UI3.
Forms to be completed:
UI19 and UI2.7 (completed by Employer)
UI2.2 (a portion of which is completed by the Doctor)
UI 2.8 (bank form completed by the bank)
Copy of ID document
1.4 Death benefits
If the employee dies, the UIF will pay the funds to beneficiaries.
Forms to be completed:
UI19 and UI 53 (completed by the Employer)
UI 2.5 or UI2.6 (deceased application)
Death Certificate
ID of deceased and applicant
UI 2.8 (bank form completed by the bank)
Copy of ID document
You can also download the UIF’s “Easy-Aid Guide for Employers” https://www.fasa.co.za/corona/corona-uif-info.pdf
- Temporary Employee/Employer Relief Scheme (TERS)
This applies to businesses who temporarily shut down – a three-month period is envisioned but this could be extended. The UIF then pays salaries to all staff, based on the current UIF pay outs – a maximum of R6 731 p.m. for staff earning R17 162 or more down to the minimum wage of R3 500.
There is quite a bit of documentation here – send an email to Covid19ters@labour.gov.za and you will get the forms to be completed and other requirements needed.
A Memorandum of Agreement is signed and the employer submits (in the required format) a spreadsheet of employee details and salary, proof of payment of the last 3 months’ salaries, bank confirmation of the applicable bank account.
You will need to open a separate bank account for this and prove each month that all staff have been paid.
There is quite a bit of work here and getting the forms accurate will prevent delays in payment.
Which of the two schemes to choose from depends on your business – there is some crossover, for example, quarantined employees can claim under the National Disaster Benefit (see Quarantine and Illness). On the face of it, TERS looks more lucrative but it is very admin intensive in setting up, and as a new scheme it may be subject to teething problems. Ask your accountant for advice in doubt. |
Please note: The information provided above should not be used or relied upon as professional advice.