Measures to assist SMMEs during COVID-19 crisis

Compiled by Gerda Herman
Raizcorp Finance Guide

During the current “system shock” created by the COVID-19 pandemic and, more specifically, during the national lockdown, various role players have put up their hands to assist small businesses. Here is an overview of what is being put into place.

Support for the informal sector

According to President Cyril Ramaphosa, a safety net is being developed to support the informal sector, where most business will have to shut down. More details regarding this still need to be communicated. It is also not clear if the Solidarity Fund will be used to support these business owners.

Temporary Employee Relief Scheme (TERS)

The Temporary Employee Relief Scheme (TERS) will support employers by paying employees to help avoid retrenchments. The scheme will be administered through the Unemployment Insurance Fund. Reserves in the UIF system are available to support employees of companies which are unable to support their staff. Employers who are forced to close their businesses during the lockdown and who can’t afford to pay their employees will qualify for a COVID-19 Temporary Relief Benefit. This is how it works:

To benefit, companies must be registered as employers with the UIF.
Affected companies must report this via email to Covid19ters@labour.gov.za.
A percentage of the employee’s salary, according to a legislated sliding scale from 38% (highest earners) to 60% (lowest earners) will be paid.
The maximum amount paid per month will be R17 712 per employee.
The minimum payment will be equal to the minimum wage of the sector.
The normal UIF rule that employees must accumulate one day’s pay out for every four days of work (up to certain maximums) will fall away for this benefit.
It is possible that bargaining councils may have separate agreements with the UIF, e.g. the clothing sector has published an agreement where the UIF and employers will take turns to pay weekly wages to workers during the lockdown.
To access funding through the TERS fund, the following is needed:

Key documents

- A letter of authority on an official company letterhead granting permission to the specified individual to lodge a claim on behalf of the company
- MOA (completion of the agreement between the UIF, bargaining council and employer)
- Prescribed template requiring critical information from the employer
- Evidence / payroll as proof of employee’s salary for last three months
- Confirmation of bank account details in the form of the latest certified bank statement

All documents submitted will be subject to verification.

Submission process

- Submit all required documents to the UIF using the dedicated mailbox Covid19UIFclaims@labour.gov.za. NB: If the spreadsheet is complete, valid and accurate, it will dumped into an automated calculator to produce the benefit amount due to the beneficiaries and the total amount to be transferred to the employer or bargaining council or whichever method is agreed upon.
- Payment will only be done after MOA sign off between the UIF and the employer / bargaining council.
Illness through exposure at the workplace to the COVID-19 virus will be paid through the Compensation Fund.
Employers may apply to the UIF to assist in the payment of employees’ salaries. This will be done through the existing illness and reduced work time benefits.
- Where a company shuts down or implements short time benefits, payable will be the difference between what the employer pays and the normal UIF benefits payable should an employee lose employment. The normal rule of four days worked for one day’s payout applies. Forms to complete and required documentation are:
  - UI19 and UI2.7 (completed by the employer)
  - UI12.1b
  - UI2.8 (bank form completed by bank)
  - A letter from the employer confirming that reduced work time is due to COVID-19
  - Copy of ID document
- Illness benefits will apply where an employee has been quarantined for 14 day. The normal rule of four days worked for one day’s payout applies. Forms to complete and required documentation are:
  - A confirmation letter from both employer and employee as proof that both parties have agreed to the 14 day “special leave”
  - If employee is quarantined for more than 14 day, a medical certificate from a medical practitioner must be submitted together with Continuation Form UI3
  - UI19 and UI2.7 (completed by the employer)
  - UI2.2 (a portion to be completed by the medical practitioner)
  - UI2.8 (bank form completed by bank)
  - Copy of ID document
- In the event of death of a contributor, benefits will be paid to the beneficiaries of the deceased. The order of eligible persons to apply are spouse, life partner, children and nominated persons. The normal rule of four days worked for one day’s payout applies. Forms to complete and required documentation are:
  - UI19 and UI2.7 (completed by the Employer)
  - UI2.5 or UI2.6
  - Death certificate
  - UI2.8 (bank form completed by bank)
  - ID document of deceased and applicant
- Application forms can be downloaded from the Department of Employment and Labour website: labour.gov.za
- A new National Disaster Benefit has been established to assist employees during a temporary lay-off (where the employer had to close the business as a direct result of COVID-19 . The employer has to apply for the National Disaster Benefit from the UIF. A flat rate equal to minimum wage (R3 500) per employee for the duration of the shutdown or a maximum period of three months whichever period is the shortest will be paid. Forms to complete and required documentation are:
  - UI19 and UI2.7 (completed by the Employer)
  - UI2.1 (application form)
  - UI2.8 (bank form completed by bank)
  - Copy of ID document
  - A letter from the employer confirming the company shutdown or employee’s temporary lay-off is due to COVID-19.

Relief from banks

Commercial banks are exempted from provisions of the Competition Act to enable them to provide debt relief to clients. (Nedbank, FNB, ABSA and Standard Bank have indicated either payment holidays, longer payback terms or a willingness to award short-term loans and overdraft facilities to small businesses affected by the lockdown.)

Tax relief

A tax subsidy of up to R500 per month for the next four months for employees in the private sector who earn below R6 500.
Employment tax incentive reimbursements will be paid monthly to compliant employers (instead of twice a year)
Businesses with a turnover of less than R50 million will be allowed to delay 20% of the PAYE liabilities over the next four months (only if they are tax compliant).
Above businesses may also delay a portion of the provisional corporate income tax payments over the next six months (without penalties or interest). Again, only if they are currently tax compliant.
A possibility of temporary reduction of both employer and employee contributions to the Unemployment Insurance Fund and employer contributions to the Skills Development Fund is being investigated. More details to follow.

Three interventions administered by SEFA

More than R500 million is available to assist small and medium businesses through three interventions administered by SEFA:

A business growth facility
SMME relief finance
Restructuring of SEFA–funded SMMEs

Business growth facility
The business growth facility will focus on the production and supply of healthcare and related products that will be utilised to combat the spread of COVID-19, as well as local production, manufacturing and supply of various products that will be required by the country owing to shortages resulting from the pandemic.

Terms for funding

Funding for working capital (only direct costs), stock, bridging finance, purchase order finance and capital equipment finance.
The type and amount required will be based on the funding needs of the business.
Terms of the funding will be determined by the business cash flow and debt-sculpting techniques will be utilised.
Loan facilities will be provided at an interest rate of prime less 5% per annum.
Business development services from SEDA such as product testing, certification, etc.

Qualifying criteria

Businesses geared to take advantage of supply opportunities resulting from the COVID-19 pandemic or shortage of goods in the local market
100% owned by South African citizens
Employees must be 70% South African
Priority will be given to businesses owned by women, youth and people with disabilities
Be registered and compliant with SARS
Be UIF compliant
Registration on the National SMME Database at www.smmesa.gov.za

Funding requirements

Complete the simplified online application process
Company statutory documents
FICA documents
Certified ID copies of directors / members
Six months of bank statements
Latest annual financial statements or management accounts not older than three months from date of application (statement of financial performance and statement of financial position) – where applicable
Business profile
Project execution plan
12 months of cash flow projections (with clear assumptions) – where applicable
Copy of lease agreement or proof of ownership
Relevant industry certification – where applicable
Copy of contract or purchase order
Facility statements of other sunders – where applicable
Quotations for applied funding

SEFA application process

SMME submits funding application with smmesa.gov.za registration number and supporting documentation to dedicated SEFA email address at info@sefa.org.za
SEFA national team reviews application and completeness (SEFA call centre)
SEFA performs verification

SMME Relief Finance
The SMME Relief Finance is loan funding that will keep existing businesses afloat during the COVID-19 pandemic for six months from April 2020.

Funding terms

Offer is for working capital only – strictly direct costs which should be auditable
Maximum R500 000 per SMME will be considered depending on requirements
Terms of the funding will be determined by the business cash flow
Interest rate of prime less 5%

Qualifying criteria

Businesses which are negatively affected due to the COVID-19 pandemic
Company must be 100% owned by South African citizens
Employees must be 70% South Africans
Priority will be given to businesses owned by women, youth and people with disabilities
Be registered and compliant with SARS
Be UIF compliant
Registration on the National SMME Database – smmesa.gov.za

Funding requirements

Proof that the business is negatively affected by COVID-19 pandemic
Complete the simplified online application process
Company statutory documents
FICA documents
Certified ID copies of directors
Six months of bank statements
Latest annual financial statements or latest management accounts not older than three months from date of application (statement of financial performance and statement of financial position) – where applicable
Business profile
12 months of cash flow projections (with clear assumptions) – where applicable
Copy of lease agreement or proof of ownership
Facility statements of other funders – where applicable
Detailed breakdown of application of funds including salaries, rent, etc.

SEFA application process

SMME submits funding application with smmesa.gov.za registration number and supporting documentation to dedicated SEFA email address at info@sefa.org.za
SEFA national team reviews application and completeness (SEFA call centre)
SEFA performs verification

SEFA-funded SMMEs
SEFA funded SMMEs that are negatively affected by the COVID-19 pandemic will receive the following interventions from SEFA through restructuring:

Payment moratorium / holiday

A period of a maximum of six months to reduce the instalment burden of loan obligations on clients during the COVID-19 period (if COVID-19 pandemic goes beyond the six months period, re-evaluation of the moratorium will be made)
Deferments of capital or both capital and interest. Interest accrued will not be capitalised into the loan facility over the proposed six-month maximum period
Proof of the negative impact of COVID-19 must be submitted

Debt restructuring

SEFA-funded SMMEs will be analysed to assess which clients require restructuring of the loan accounts
Could be extended loan term, interest review and additional funding where required
Facilities will vary per funded SMME depending on the entity’s cash flow needs
The debt repayments will be matched to the pattern of the cash flow
Additional funding will be at prime less 5%; this will ensure that the already funded SMMEs are protected from high interest rates and are offered an opportunity to survive post the COVID-19 pandemic

SMMEs are required to register on the SMME South Africa platform. The SMME registration database (smmesa.gov.za) would also be used to alert micro, small, and medium-sized businesses about opportunities and market-support measures to be implemented in future.

More than R3 billion is available for industrial funding for vulnerable firms and to provide quicker financing for companies critical to efforts to fight the virus and its economic impact through a package put together by the Industrial Development Corporation and the Department of Trade, Industry and Competition.

The Department of Tourism is assisting SMEs with R200 million.

The Government has published a list of essential services (visit www.ccma.org.za/essential/about.html). Companies that have registered as essential service providers are able to continue with their operations.

Sources