Home Accounting and Auditing Ramaphosa’s Covid response: 21 day lockdown and financial support for businesses

Ramaphosa’s Covid response: 21 day lockdown and financial support for businesses

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President Cyril Ramaphosa has announced a 21-day lockdown to prevent the further spread of the Covid-19 virus – with more than 400 now testing positive for the virus – as well as a raft of measures aimed at supporting vulnerable communities, employees and businesses.

The 21-day lockdown starts at midnight on Thursday 26 March and ends on 16 April.

Here are the key points of the speech:

  • Government will provide support for the vulnerable, and has set up a Solidarity Fund supported by business as well as local and international donors to combat and track the spread of the virus. It will also provide relief for the ill and those whose lives are disrupted (donations are accepted at www.solidarityfund.co.za). Government has provided seed capital of R150 million.
  • The Rupert and Oppenheimer families contributed R1 billion each to support small businesses, though no indication was provided as to how these funds will be disbursed.
  • Ramaphosa expressed concern over price gouging of essential goods by opportunistic businesses. Regulations have been put in place to ensure stocks remain in place and to prevent panic buying.
  • A safety net being developed to support informal sector operators, with more details to be announced shortly.
  • Social and old age grants will be available from 30 March. ATMs, retail point of sale devices, post offices and cash pay points will remain open during the lockdown.
  • Relief for companies in distress: employees are to benefit from a temporary relief scheme, which will allow companies to pay employees directly and help to avoid retrenchment.
  • Employees falling ill will be paid through Compensation Fund.
  • Commercial banks are being exempted from provisions of Competition Act to enable them to provide debt relief and other measures, details of which will be announced in the next few days. Standard Bank has already announced certain debt relief measures.
  • Many companies that have closed accepted their responsibilities to pay workers. In the event it becomes necessary, UIF funds will be used to extend support to SMEs and other vulnerable firms faced with loss of income. More details to follow in a few days.
  • Assistance for businesses in distress: a tax subsidy of R500 per month for next four months will be made available for those earning R6,500 under the Employee Tax Incentive. This will help more than 4m workers.
  • SA Revenue Services (Sars) will accelerate the payment of employment tax incentive reimbursements from twice a year to monthly to get cash into the hands of tax-compliant businesses. Businesses with annual turnover below R50 million will be able to delay 20% of their PAYE liabilities over next four months and a portion of their corporate income tax payments without penalties. This will benefit more than 75,000 SMEs.
  • Government is exploring temporary reduction of employer and employee contributions to UIF and employer contributions to Skills Development Fund.
  • The Department of Small Business Development has made over R500 million immediately to assist SMEs in distress through a simplified application process.
  • The Industrial Development Corporation (IDC) and the Department of Trade and Industry (DTI) has made more than R3 billion available for vulnerable firms. No details have yet been provided on how this will be disbursed.
  • The Department of Tourism made an additional R200 million for tourism-related businesses in distress.
  • Ramaphosa said steps have been taken to strengthen the banking system by increasing liquidity, raising capital and reducing leverage. With deep and liquid capital markets, the banking sector has the space to support the economy.
  • The Reserve Bank has already cut the repo rate by 100 basis points, and has committed to providing additional liquidity for the banking sector.
  • The banking system, JSE and National Payment System will all remain open during the lockdown.