Over the last few weeks, it has become strikingly evident for many businesses that the COVID-19 pandemic, the national lockdown and the global recession have had an adverse economic effect on their ability to operate and possibly even survive, especially over the short term, and in particular while the crisis continues. Businesses are experiencing pressure in terms of cash flow and their ability to cover their costs, including paying their employees.

To assist businesses and the economy, various debt relief and financial assistance schemes have been established by government and private sector supporters. These measures are aimed primarily at assisting small and medium sized entities (“SME”). These measures are in addition to the tax and employment incentives extended by government, as discussed in our previous communications.

We have compiled a list of some of the most relevant debt relief and financial aid mechanisms established by government for which your business may be eligible to apply to for assistance:

• Debt Relief Finance Scheme

This is an initiative established by the Department of Small Business Development. This fund aims to provide assistance to lessen the impact of the national lockdown and expected economic slowdown on SME’s.

This fund is geared to assist SME’s that are negatively affected, either directly or indirectly, as a result of the COVID-19 pandemic, for a period of six months. This assistance will be structured by way of a loan (with an interest rate of prime minus 5%) in order for these businesses to finance the payment of staff salaries, rates and taxes and working capital.

The total fund value available for assistance amounts to R500 million.

The criteria for SME’s to be eligible to apply for this funding are as follows:

• The business must have been registered with the CIPC by at least 28 February 2020.
  • The business must be 100% owned by South African citizens.
  • At least 70% of the employees must be South African citizens.
  • Priority will be given to businesses owned by women, youth and people with disabilities.
  • The business must be registered and compliant with SARS and UIF.
  • SEDA will assist micro-enterprises to comply and request for assistance must be emailed to debtrelief@seda.org.za, whereas small and medium enterprises must ensure their own compliance.
  • Proof that the business is negatively affected by COVID-19 pandemic.
  • Completed online application must be submitted.
  • The statutory documents of the company are to be provided.
  • FICA documents are to be provided.
  • Certified ID copies of the directors are to be provided.
  • Three months bank statements are to be provided.
  • The latest Annual Financial Statements or Latest Management Accounts, not older than three months from date of application, are to be provided.
  • A business profile is to be provided.
  • Six months cash flow projections, where applicable, are to be provided.
  • A copy of lease agreement or proof of property ownership is to be provided if the business is applying for rental relief.
  • If applying for payroll relief, details of employees, as registered with UIF and including banking details, will be required as payroll payments will be made directly to employees.
  • SME employers who are not compliant with UIF must register before applying for relief.
  • Facility statements of other funders to be provided (if applicable).
  • Detailed breakdown on application of funds including salaries, rent etc. to be provided.

In order to launch an application, please visit their website at http://www.smmesa.gov.za/.

• The Industrial Development Corporation of South Africa (“IDC”)

The IDC has structured a range of financing and funding products that may be applied for by business struggling as a result of the COVID-19 pandemic and the national lockdown.

The IDC has R300 million available to assist businesses with funding their working capital. The Small Enterprise Finance Agency and the National Empowerment Fund also each have R200 million available for this purpose.

In order to determine if your business is eligible to seek assistance from the IDC and launch an application, please contact them at covid@idc.co.za or 0860 693 888.

• Solidarity Fund

Although this fund will not provide economic support to SME’s, it is interesting to take note of. This fund was established by donations by the Oppenheimer family and Naspers Ltd, amounting to a total of R1.65 billion, and is aimed at advancing the of prevention, detection, care and support of those whose lives has been disrupted by the COVID-19 pandemic.

For more information please visit the official website at https://www.solidarityfund.co.za/.

Look out for further communications from us which will provide more information regarding other debt relief and financing schemes available by members of the private sector, and which your business may be eligible to apply for.

Stay safe during this time and look out for further advisory updates from us.