21 Jun Covid19: Relief funding and what that means for SMMEs
There was a sense of security that blanketed the initial fears of business owners within the SMME community when it was announced that the Oppenheimer family had created The South African future trust (SAFT). Together with other affluent business families in partnership with the government, R1 billion was pledged towards assisting SMMEs in their looming financial difficulty.
Banks and financial services alike added to the relief by offering client payment holidays and tax relief measures were also made available. But what is the SMME Debt Relief Finance Scheme and how does it benefit SMME’s? This fund was established and administered by the Department of Small Business Development.
Although the 6-month term soft-loan package (Effective as of April 2020) that is structured to match the SMME’s cash-flow could ease tensions, it is important to note that the registered SMMEs need to meet requirements in order to be eligible. proof that the business is negatively affected by the Covid19 pandemic and the link between the company’s financial distress and the pandemic should be made clear.
Hopefully this includes companies that were already struggling under South Africa’s less than satisfactory economic woes that then had the wind knocked out of them during the government mandated lockdown.
Other supporting documents required include 6 months’ cash flow projections, 3 months of bank statements, latest annual financial statements or latest management accounts and the expected SARS registered and tax compliance forms.
We don’t have the statistics but with the life disruption that has been the reality of millions of South Africans as a result of the national lockdown and the ripple effects it has caused for the commercial sector, it is safe to say that despite constant mainstream media reports, the results have been quite devastating on the ground.
Post the release of the relief funds it seems as if the funds served as nothing more than a very temporary short-lived stop gate solution for a very drawn out complex economic problem.
The business sector’s tensions are rising because of the enforced perpetual reality that the level phases have put upon how their businesses are run and the rate at which they are able to make money.
The SMMEs that are reported to have benefited relatively well from the funds aren’t reflective of the majority of the SMME landscape, what about the start-up SMMEs that recently invested money into their businesses prior to the lockdown who don’t have the necessary requirements to receive the funding that their more established counterparts are eligible to receive?
I have spoken to numerous relatively established businesses that have retrenched staff members or have shut down completely as a result of the lockdown, who showed potential to grow but weren’t strong enough to withstand the economic blow that other businesses were barely able to endure.
There is clearly somewhat of an idealistic disconnect with the economic policies, laws and solutions implemented for the benefit of this nations business landscape, if it wasn’t apparent before…. The pandemic has certainly done quite the job at highlighting its true beneficiaries.
The South African Trust fund works in a similar fashion, although it is an independent trust, it is administered as an interest free loan to participating SMMEs. SAFT will transfer funds directly to employees, who themselves, carry no liability.
The loans will be interest free for a 5- year period. If businesses are unable to pay the loan, SAFT will work closely with them to ensure suitable and sustainable payments are in place. Instalment payments are to be made during the 5-year course, as determined and agreed upon by SMMEs, or as a lump-sum on or before 31 December 2025. That being said, how many registered SMMEs are eligible and how much of these funds are helping SMMEs in real time?
Is your business a registered SMME? Do share your thoughts and experiences on the current relief funds solutions administered by the government and the private sector.