The President last night outlined various measures to support companies and workers, including a R200-billion loan guarantee scheme to assist enterprises negatively affected by the Covid-19 lockdown, as part of a broader R500-billion social and economic relief package last night.
The package is designed to respond to the devastating economic and social fallout that has accompanied government’s response to the pandemic.
The support for companies and workers forms part of a four-part package that also includes an extraordinary health Budget to strengthen the fight against the virus; a series of measure designed to relieve hunger and social distress and plans for a phased re-opening of the economy.
Full details of the adjustment Budget will be tabled by the Finance Minister in the coming days, while the President will address the nation again on Thursday April 23 to provide additional details regarding the phased re-opening of the economy.
LOAN GUARANTEE SCHEME
A new feature of government’s support for business is a R200-billion loan guarantee scheme, which would be implemented in partnership with South Africa’s major banks, the National Treasury and the South African Reserve Bank to assist enterprises with operational costs, such as salaries, rent and the payment of suppliers.
In the initial phase, companies with a turnover of less than R300-million a year would be eligible and it was anticipated that the scheme would support over 700 000 firms and more than three-million employees through this difficult period.
Also announced was an additional R100-billion for protection and creation of jobs and to create jobs, in addition to the R40-billion set aside for income support payments for workers under the Temporary Employer/Employee Relief Scheme (TERS), which is being administered by the Unemployment Insurance Fund (UIF).
The President also announced that an additional R2-billion would be made available to assist small businesses and spaza shop owners and the taxi industry.
MORE TAX RELIEF
Various additional tax measures were also unveiled, which the President said should provide at least R70-billion in cash-flow relief or direct payments to businesses and individuals.
Among the measures announced were the introduction of a four-month holiday for companies’ skills development levy contributions; the fast-tracking of Value Added Tax refunds; a three-month delay for filing and first payment of carbon tax; and a 10% deduction from taxable income for those who donate to the Solidarity Fund.
To assist a greater number of businesses, the previous turnover threshold for tax deferrals is being increased to R100-million a year, and the proportion of PAYE payment that can be deferred will be increased to 35%.
Businesses with a turnover of more than R100-million a year could apply directly to the South Africa Revenue Service on a case-by-case basis for deferrals of their tax payments.
The other main health and social components of the package unveiled include:
- The reprioritisation of some R130-billion within the current Budget towards health;
- Additional funding of R20-billion for municipalities for the provision of emergency water supply, increased sanitisation of public transport and facilities, and the provision of food and shelter for the homeless;
- An additional R50-billion allocation for various social grants, which would result in the child support grant rising by an additional R300 in May, and by an additional R500 a month from June to October. All other grant beneficiaries would receive an additional R250 a month for the next six months; and
- A special ‘Covid-19 Social Relief of Distress’ grant of R350 a month for the next six months to be paid to individuals who are currently unemployed and do not receive any other form of social grant or UIF payment.
- The President indicated that the package would be funded through a combination of domestic and foreign sources and confirmed that the National Treasury was in talks with various foreign funders, including the World Bank and the International Monetary Fund.
(Acknowledgment and Source: Creamer Engineering News: 22 April 2020)