SMME Support during the COVID-19 epidemic - Outsourced Finance

While worldwide economies are threatened with the possibility of coming to a grinding halt due to the COVID-19 epidemic, small businesses in South Africa face apprehension and uncertainty as they head into the unknown realm of the national shut down.

The question posed is “How will Small, Medium and Micro Enterprise (SMMEs) survive during self-isolation, mandatory work from home policies and the potential loss of suppliers/ buyers in the market?”

Thankfully these questions have been answered at a government level, with the implementation of safety nets for small businesses around the country ensuring that while the country avoids contagions businesses can survive the market slump.

UIF claim for temporary shut down

The department of labour has announced special regulations that will enable the Unemployment Insurance Fund (UIF) to offer relief to companies that find themselves in distress due to the COVID-19 outbreak. If a company is forced to shut down for a limited period due to precautionary health measures in response to COVID-19,  the UIF benefit will apply. This benefit is to prevent layoffs and ensure that employees still receive payments to ensure their livelihoods.

The department of labour has extended benefits for cases where employees have needed to practice self-quarantine for two weeks or longer as a result of exposure to the virus. The time taken off work due to isolation will be recognised by the department as special leave – provided that this leave meets government health guidelines, employees will then receive paid UIF benefits. The department of labour has issued these reprieves for small businesses’ to ensure their survival once the pandemic is over, as well as to reduce layoffs and curb potentially high unemployment rates that will be caused by the COVID-19 pandemic. Other measures will be taken by the South African government to ensure that small businesses survive the market slump caused by the national shut down, to prevent further pressure on the economy once the shutdown is over.

Government SMME support

Small business development minister Khumbudzo Ntshavheni has announced that the South African government will service the debt of small businesses during the COVID-19 pandemic national shutdown. This is a response by the government to the inevitable slowdown of the economy due to suppressed productivity during this period. In an attempt to curb any further adverse effects caused by the national shutdown, the government is giving a lifeline to small businesses that can’t afford the loss of customers and suppliers. The Debt Relief Fund has been created to provide relief on existing debts and repayments, to assist SMMEs during this period. However, there are requirements needed before aid can be given, including the demonstration of a direct link to the impact or potential impact the COVID-19 pandemic had on business operations.

The small business department has also announced relief for small businesses and in some cases, the likes of hawkers and the self-employed, making available a range of funds and mechanisms for survival. Some small businesses will be permitted to receive loans at prime less 5%, which currently means an interest rate of 3.75% per year. However, those that try to miniplate and take advantage of the crisis will be punished with interest rates of prime plus 10 percentage points, meaning chancers caught out will pay 18.75% in interest. The requirements needed for support from the various funds include:

  • The businesses must be 100% South African owned
  • At least 70% of employees must be South Africans
  • Recipients must be tax compliant and registered with the South African Tax Revenue Services (SARS)

The government is not the only organisation that has come to the aid of SMMEs with many banks looking at the role they will play in ensuring the prosperity of the South African economy.

Bank relief for SMMEs 

Along with the government, many other organisations are stepping up to the plate to ensure the survival of SMME’s. Standard Bank has announced the Coronavirus Business Interruption Payment Scheme, which will provide payment relief to SMME’S for 90 days – launching on the 1st of April. To be eligible for this payment relief the following requirements apply:

  • Your business is South African based, with a turnover of no more than R 20 million per year
  • Your Business Current account, Bizlaunch account, and Business Lending accounts are paid up to date
  • Your business is in good standing

The Reserve Bank has also guaranteed help by slashing rates by 100 basis points for the first time in a decade, announcing additional liquidity measures to ease the pressure on the system. First National Bank also jumped on the bandwagon and announced that the company is working with the Reserve Bank and Banking Association SA to find solutions to support consumers and businesses. These banks have recognised the impact the shutdown will have on businesses and the economy as a whole – supporting those that are beating the odds by continuing operations via digital means.

Adapt to digital 

As mandatory work from home policies are implemented, having a digital presence has never been more relevant. The time to adapt to digital is now and each business must take the necessary measures to ensure that operations continue despite the national shut down. The following tips can be followed to ensure that your company can work remotely through the digital realm:

  • Get everyone behind the change – the first step is to ensure that each person in your team is embracing the necessary changes
  • Identify how your business can operate digitally – have a good understanding of how your business is going to operate digitally, whether that means a new website or an overhaul of internal structure to support remote communication.
  • Invest in cloud computing services – by moving to cloud-based solutions, huge savings can be achieved in terms of management and space. Google Drive, Microsoft Box, Dropbox are easy to use and setup takes just a few minutes; you can have your business fully backed up and accessible anywhere in the world.
  • Put more into digital marketing – ensure that you have an online presence, make sure that customers will be able to find your services o Digital assets such as a relevant website and social media presence are vital.

Adapting to digital can be tricky, thus a business must train its employees to use the necessary platforms adequately before making the shift. Many online platforms can also support conversation between your employees such as Skype, Zoom and Google Hangouts – to ensure the effective flow of information in the organisation.

Working as a collective is key to maintaining a healthy economy once the dust settles, this includes governments, corporations, small businesses and individuals alike. Whilst panic incurs worldwide due to the pandemic, businesses should play their part in sticking together to mitigate the negative effects that will arise from the COVID-19 outbreak. It’s time for adaptation to ensure survival.

 

 

 

 

Xavier Olivier


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