Unpacking the SMEs funding procedure

R500m-plus R2bn available to assist small businesses.
Understanding the different funds available during Covid-19. Image: Shutterstock.

The government said it has allocated three funding schemes to financially assist small and medium enterprises (SMEs), to alleviate the impact of the expected economic slowdown.

These three schemes of funding include the:

  1. Debt Relief Fund;
  2. Business Growth/Resilience Facility and the;
  3. Rupert and Oppenheimer family’s donation of R2 billion.

However, there seems to be very little clarity on how the entrepreneur will access this much-needed funding as Covid-19 is killing the economy one small business at the time.

Chief of staff at the department of Small Business Development, Sarah Mokwebo, spoke to Moneyweb to provide clarity on the three funding facilities and the procedures that SMEs need to follow in order to be considered for funding.

Debt Relief Fund

Last week Friday the Department of Small Business Development said it’s finalising an SME support intervention comprising of a Debt Relief Fund and Business Growth/Resilience Facility to mitigate the impact of the expected economic slowdown on small and medium enterprises (SME) in the country.

This fund is currently a budget of R500 million, however, Mokwebo says that the department is currently in discussions on whether this fund will be increased.

According to Mokwebo, the purpose of the Debt Relief Fund is strictly is to assist small businesses that are experiencing financial challenges as a result of Covid-19.

“So, the Debt Relief Fund is not to assist businesses that have been experiencing financial challenges prior to Covid-19 [pandemic],” Mokwebo says.

She says that this fund is not available to assist small businesses that were already in financial stress for different reason prior to the outbreak of the pandemic in the country.

“So, the Debt Relief Fund is not to assist businesses that have been experiencing [financial] challenges owing to different reasons”.

To access the fund, businesses are required to register on the SMME South Africa platform.

It requires applicants to fill in the details of their shareholder/s as well as their employee demographics and whether or not they require financial assistance or non-financial assistance.

businesses wanting to apply for funding assistance need to meet the following criteria:

  • They must be 100% owned by South African citizens
  • They should employ at least 70% SA nationals
  • They must be registered with the South African Revenue Service (Sars) and tax-compliance.

It must be noted that priority will be given to businesses owned by females, the youth and persons with disabilities.

Growth/ Resilience facility

Mokwebo says the difference between the Relief Fund and the Growth/ Resilience fund is that it is a soft loan.

“The Growth and Resilience are targeted at SMEs that are manufacturing what could be considered essential goods—as you may be aware the Covid-19 pandemic is a global one and that means, for example,  if a country was importing gloves that are manufactured in another country prior to the outbreak,  they can no longer receive the same volume because they are redirecting [the resources] to their country as it is also dealing with the pandemic, “Mokwebo says.

Mokwebo adds that the onus, therefore, lies on the department to ensure that SMEs within SA that is capable of manufacturing or producing the essential good need to combat Covid-19 increase their output in order to meet the demand.

For businesses to qualify for funding, they need to meet the government’s definitions of micro, small and medium enterprises in SA, which was published last year Mach.

The turnover threshold for businesses to qualify for the funding depends on the sector in which they operate.

“So, all the categories are in accordance with what was gazetted by the department last year March”.

However, she says that when they are considering assisting SMEs, they are going on a case by case basis, also because the onus is on the SME to prove how their business operations are affected by Covid-19.

This is considering the flow of goods and services being restricted due to the country being in a 21-days lockdown, and prior to that being declared a national State of Disaster.

It imperative that small businesses be tax compliance when applying for these funding.

“Before we consider your application, we would need to take you through the process to comply. But that form of assistance is only available for micro-businesses, the bigger businesses will have to ensure compliance by themselves, because they have the resources to ensure that they comply, ” Mokwebo says.

SMEs may apply for this funding as well through the SMME South Africa platform.

Rupert and Oppenheimer family’s donation

President Cyril Ramaphosa announced on Monday evening that the Rupert and Oppenheimer families donated R2 billion.

This two billion is to also assist small businesses operations and their employees that have been financially impacted by novel Covid-19.

“This is still a work in progress. We can’t say for certain how the administration of that fund will work,” Mokwebo says.

However what must be stressed is that the Rupert and Oppenheimer families donation is not part of the Solidarity Response Fund (https://www.solidarityfund.co.za/), as it independently administered and will work with other initiatives to combat Covid-19.

Through this Fund individuals and organisations will be able to support these efforts through secure, tax-deductible donations. The President has appointed Gloria Serobe as the Chairperson of the Fund.

UIF Subsidy

On Friday morning the department of labour announced that employers that are unable to pay the full salaries of the workers and have had to send them home for their health and safety due to the lockdown are encouraged to apply for the Covid-19 TERS  benefit by sending an email to covid19ters@labour.gov.za.

Tax

Considering the devastating economic impact of this pandemic, the President also announced a number of measures to help tax compliant companies in distress and their affected employees, especially SMEs.

Mokwebo says the department of treasury will issue SARS with the procedure of tax alleviation once they have concluded their discussions.

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Do you need to employ someone because I have a rental business where I have contracts in place where the clients pays me a fixed income per week. This is done on a long term basis. In other words im the sole owner 100% and I don’t employ anyone and I am an south african of course. Does that still mean I qualify taking into account that I am still tax compliant.

Does a close corporation which consists of 2 members who are paid a salary via the CC and does not employ other employees, qualify for assistance ?

I too am a business owner (pty ltd) and don’t employ anyone however my business was hugely affected by the fact that I could not get any raw materials due to covid 19 and these materials were secured by the bigger companies who obviously could block us micro businesses.

End of comments.

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