Despite news that the Rupert R1 billion donation for SME assistance has been shut down after being over-subscribed 2.8 times, it turns out only 60% of the R100 million set aside as grants has been taken up.
Speaking to Accounting Weekly on Wednesday, Mark Paper, chief operating officer at Business Partners – which is administering the fund – says he is surprised that only 60% of the fund set aside for non-repayable grants had been taken up. “We expected that this would have been quickly over-subscribed because we are offering grants of R25,000 to qualifying sole proprietors, and the repayment of this money is voluntary.”
This means that only about 2,400 applications out of a possible 4,000 were made for grants.
One of the hurdles that seems to have blunted enthusiasm for applying for grants is the need for tax compliance. Paper says Business Partners had to establish a compliance threshold for applicants, and this seems to have dissuaded many people from applying.
It also potentially points to the high rate of tax non-compliance among sole proprietors.
Paper’s advice to sole proprietors that are tax-compliant is to continue to visit the Business Partners portal and submit applications (at https://finance.businesspartners.co.za/).
The 2.8 times over-subscription therefore applies to the 0% loans with no obligation to repay capital or interest for 12 months (interest is charged at prime rates thereafter).
As we previously reported, it only took a weekend before Business Partners stopped accepting applications for SME Covid-19 assistance. The portal was opened last Friday and shut down on Monday after being 2.8 times over-subscribed.
Paper says Business Partners received more than 10,000 applications in a matter of days.
This number will whittle down, however, as some submitted duplicate applications, and others were incomplete. “We have been in contact with all of those clients who submitted duplicate or incomplete applications and forwarded them a link where they have seven days to complete the application,” says Paper. “Once we’ve done our due diligence, we again expected to see a reduction in the over-subscription.
“Will still most likely will be over-subscribed. If not, we will open the site again for applications,” says Paper.
Approaching other corporates and wealthy individuals for further SME funding assistance
Paper says in the event the fund remain over-subscribed, plans have already put in place to approach other corporates and wealthy individuals to top up the fund. Business Partners is revising the trust and other documents to accommodate multiple donors. “We’ve had inquiries as to how the platform works and we’re open to other donors. Even man in the street asking how they can participate,” says Paper. “We will very soon post details on our website explaining how people can donate.
“We want to make sure we have the governance in place and necessary reporting mechanisms and certificates from a tax point of view.”
The intention is for Business Partners to leverage its existing shareholder base – primarily Remgro and the Rupert family – for where to source additional funds into the Covid-19 Sukuma Relief Programme, as it is known.
Bridgement and fintechs are also open for business
Accounting Weekly also spoke to Daniel Goldberg, CEO and founder of Bridgement (www.bridgement.com), which is a fintech company that offers short-term funding for small businesses. Backed by the balance sheet of Capricorn, Bridgement has a large enough balance sheet to handle the spike in inquiries it is currently experiencing.
Bridgement provides funding to the very small (one-man business) up to the reasonably large, with a maximum of R5 million, though the average is R500,000. The approval process takes as little 90 minutes and can be done online (especially if you have QuickBooks Online or other cloud-based accounting system). Bridgement is able to plug into your QuickBooks package and do a rapid assessment of your financial state. Nor will you be denied access to finance because you do not have a tax clearance certificate, or because you ,may be temporarily insolvent – two of the obstacles to accessing the Rupert funds. No collateral is required, though sureties in some situations are required.
Another fintech offering short-term funding is Merchant Capital (at https://www.merchantcapital.co.za/) which is ideal for retailers – loans are repayable each time clients swipe their cards at your store.
These are definitely two additional sources of funding that businesses can explore.
Saiba mobilises members to make R50 million contribution
Nicolaas Van Wyk, CEO of the SA Institute of Business Accountants (Saiba), comments that the Rupert, Oppenheimer and Motsepe families have given SMEs in South Africa a lifeline. “the sector will forever be grateful for their contribution. In response Saiba is requesting accountants and auditors to volunteer their services to SMEs that applied for funding. We hope to convince 5,000 accountants to commit to R10,000 worth of volunteer work so the profession’s contribution will amount to R50 million.”
“Likewise we believe that listed corporates should now release some of their billions being held in reserve. For many years corporate SA has not invested in expansion due to poor economic outlook. However now is the time to reconsider that strategy. Corporates should invest funds in SMEs to ensure their survival. We cannot allow Covid-19 and the current crises to decimate the sector as this will cause massive unemployment, creating a situation far worse that the current desperate situation. The Public Investment Corporation (PIC) should also now change their investment policies to include viable SMEs.
“The government bailed out SAA, and now it’s time that we get our priorities in order by supporting SMEs in the same way. Tens of billions of rands will be needed to fund the sector for the next year as the lockdown is likely to be the cause of a significant reduction in GDP. Saving the economy and SMEs means saving lives.
“Large corporates like insurance and medical aid companies that use a business model grounded in probabilities should freeze all premium collection from SMEs. If there are no cars on the road or large numbers of accidents that require medical aid support then these companies cannot benefit to the detriment of their clients.”