The nation address by President Cyril Ramaphosa, announcing a 21 day lockdown for South Africa, brought with it some details of financial relief for small businesses.

Here is how it will effect your business, and what information we are still waiting on.

The situation right now for small businesses

All businesses who do not provide essential services or who cannot continue with employees operating remotely from home, will close their doors for a period of 21 days.

During this time many businesses will experience substantial financial losses because they cannot trade, while their fixed overheads like rent, loan repayments, salaries and the like remain unchanged.

Many businesses do not have the positive cash flow or access to debt to survive 21 days without some financial relief in order not to be insolvent, and effectively have to close their doors.

The government realises this and many of the measures announced have been in order to help keep doors open as small businesses provide employment to millions of South Africans.

How the government is going to assist businesses financially during the lockdown

Through the announced proposal, employees will receive wage payment through the Temporary Employee Relief Scheme, which will enable companies to pay employees directly during this period and avoid retrenchment. The details of how this will work have not been released yet, nor the extent of the relief that this scheme will provide to each small business.

The Department of Small Business Development has made over R500 million available immediately to assist small and medium enterprises that are in distress through a simplified application process. The details of this application process are not yet available, but will be made available here as soon as they are.

The Industrial Development Corporation has put a package together with the Department of Trade, Industry and Competition of more than R3 billion for industrial funding to address the situation of vulnerable firms and to fast-track financing for companies critical to our efforts to fight the virus and its economic impact. No details available yet on who exactly will qualify for this, how to apply, not what the criteria for selection are.

Keep the cash that is on hand.

Paying less tax. Using the tax system, government will provide a tax subsidy of up to R500 per month for the next four months for those private sector employees earning below R6,500 under the Employment Tax Incentive. This will help over 4 million workers. This means that businesses will need to pay R500 less tax per employee per month who fall into this tax bracket.

Tax compliant businesses with a turnover of less than R50 million will be allowed to delay 20% of their pay-as-you-earn liabilities over the next four months and a portion of their provisional corporate income tax payments without penalties or interest over the next six months. This intervention is expected to assist over 75 000 small and medium-term enterprises. This is a delay in repayment, i.e. a loan by the government, but will assist with immediate cash flow.

Government is exploring the temporary reduction of employer and employee contributions to the Unemployment Insurance Fund and employer contributions to the Skill Development Fund. This will be a saving to small businesses and they will not be expected to repay this saving at a future time.

“We are exploring the temporary reduction of employer and employee contributions to the Unemployment Insurance Fund and employer contributions to the Skill Development Fund. This will be a saving to small businesses and they will not be expected to repay this saving at a future time.” Details of how this will work have not been announced yet.

To get cash in the hands of businesses in order for them to pay wages during this time:

The South African Revenue Service will also work towards accelerating the payment of employment tax incentive reimbursements from twice a year to monthly to get cash into the hands of compliant employers as soon as possible.

Possible measure if things get really bad

“In the event that it becomes necessary, we will utilise the reserves within the UIF system to extend support to those workers in SMEs and other vulnerable firms who are faced with loss of income and whose companies are unable to provide support. Details of these will be made available within the next few days.”

Specific assistance to the tourism industry.

The details of who will benefit from this and how should be made available in the coming days. The Department of Tourism has made an additional R200 million available to assist SMEs in the tourism and hospitality sector who are under particular stress due to the new travel restrictions.

Do the right thing.

If your business is doing well or even doing OK and will survive this time without assistance, leave the small amount of funding there is for those businesses who won’t make it. And there are many. Let’s all see this through as best we can and live to fight another day. The more small businesses that survive in South Africa, the better for all of us (This last paragraph was not in his speech, but my request to us all).