On Monday 23 March 2020, President Cyril Ramaphosa addressed the nation detailing South Africa’s next step in its action plan to curb the spread of COVID-19. The key action includes a 21-day lock down of all but essential workers.
The three-week lock down – which comes into effect on Thursday, 26 March at midnight – can be regarded as a balancing act between containment of the virus, protection of South Africans and measures aimed at fortifying the economy against the inevitable disruption to manufacturing, productivity, growth and employment.
Measures to be implemented to soften the blow for employers and employees are:
- South Africa has set up a Solidarity Fund, which businesses, organisations and individuals and members of the international community can access to combat the spread of the virus – in addition to what is being done in the public sector. To get things moving, Government is providing seed capital of R150 million and the private sector has already pledged to support this fund with financial contributions in the coming period.
- The Rupert and Oppenheimer families donated R1 billion each to assist small businesses and their employees affected by the coronavirus pandemic.
- A safety net is being developed to support persons in the informal sector, where most businesses will suffer as a result of this shutdown. More details will be announced on this are expected soon.
- Temporary Employee Relief Scheme setup – this will see a special dispensation for companies that are in distress because of COVID-19. It will enable companies to pay employees directly during this period and avoid retrenchment.
- Any employee who falls ill through exposure at their workplace will be paid through the Compensation Fund.
- Commercial banks have been exempted from provisions of the Competition Act to enable them to develop common approaches to debt relief and other necessary measures.
- Many large companies that are currently closed have accepted their responsibility to pay workers affected.
- Reserves within the UIF system to be used if necessary to extend support to those workers in SMEs and other vulnerable firms that are faced with loss of income and whose companies are unable to provide support. Details of these are expected within the next few days.
- 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 will help over 4 million workers.
- 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.
- 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.
- A temporary reduction of employer and employee contributions to the Unemployment Insurance Fund and employer contributions to the Skill Development Fund are being considered.
- 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. Enterprises seeking assistance need to register on the SMME South Africa portal at www.smmesa.gov.za, which will be live on Tuesday, 24 March.
- 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.
- 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.
- The South African Reserve Bank has also proactively provided additional liquidity to the financial system.
- The banking system will remain open, the JSE will continue to function, the national payment system will continue to operate and the Reserve Bank and the commercial banks will ensure that bank notes and coins remain available.