Thebe Mabanga
The South African government will need a ‘Marshall Plan Worth Billions of Rands’ in order to assist Small Medium and Micro Enterprises when the COVID-19 crisis blows over after the national lockdown.
This is the core message the Black Business Council is aggressively taking to the government, according to its President Sandile Zungu, who spoke to Inside Politics as various forms of aid kicked-in last week.
“This will realistically happen after the lockdown, but we need to move with haste” says Zungu.
When he announced the 21-Day nationwide lockdown two weeks ago, President Cyril Ramaphosa also presented measures by both government the private donors to assist companies, including small businesses.
Government has put up R500 million through the Department of Small Business Development, R200 million for the tourism sector through the Department of Tourism, R3 billion worth of funding from the Industrial Development Corporation (IDC) and the Department of Trade and Industry (DTI), as well as employee support from the Unemployment Insurance Fund (UIF).
In addition to these initiatives, Ramaphosa announced that the super-wealthy Rupert and Oppenheimer families are to donate R1 billion each aimed specifically at assisting small businesses.
At the start of the lockdown, last Thursday, the National Empowerment Fund announced a R200 million support facility for black-owned enterprises in the Identified Priority Products value chain of COVID-19 medical supplies, like hand sanitizers and protective equipment, as well as basic food.
The NEF offers loans of up to R 10 million with a 12 month payment holiday and 0% interest in the first year, and thereafter 2.5 % interest and a maximum of five years to pay.
The NEF’s R200 million is separate from the department’s contribution and support.
“SMME face a challenge of lack of access to both fixed and working capital, lack of access to markets as well as late payment by government, State Owned Enterprises (SOEs) and the private sector. The COVID-19 crisis merely compounded these problems,” says Zungu, who has also been engaged in taxi industry negotiations through BBC-affiliated SANTACO.
Zungu says the crisis offers an opportunity to address long-standing structural impediments within the SMME sector.
John Dludlu, CEO of Small Business Initiative, says that “even before this crisis, our SMEs, which we found in a study two years ago formally employ nearly 4 million people, were already facing challenges of load-shedding, recession, late payments from big business and government, including SOEs and red tape”.
Dludlu says this period presents new challenges, starting with uncertainty about how long this crisis will last, the real prospect that the economy takes longer to rebound, a loss of customers and suppliers as well as failure to access the myriad of economic support measures announced by government and the private sector.
The SBI says the measures are a good start, but more needs to be done.
They have called for further rate cuts of up to 200-basis points, in addition to this month’s cut by SA Reserve Bank, and pointed out that these do not have to wait for the next Monetary Policy Committee meeting in May, access to all previously announced measures by Small Business Department, supporting not just those SMME in food and medical supplies, but all SMMEs, and availing the funds from the UIF throughout the crisis.
Liquidation orders can also be deferred by the courts, Dludlu says.
The SBI has also urged large private companies should pay all outstanding invoices, and where possible, offer advance payments to SMMEs throughout the lockdown period.
It has also called on Landlords to offer rental holidays and Enterprise Development budgets to be utilized more effectively after the lockdown and the crisis itself.
“We appreciate that SMMEs have unique challenges and are affected differently by the pandemic. As a result, we have introduced a number of measures to cushion and support them during and post Covid-19 pandemic,” Priscilla Monama, spokesperson for the Department of Small Business, told Inside Politics.
The Department’s support is in the form of a soft loan facility to keep SMMEs in business through the crisis and growth and resilience funding facility for SMMEs producing supplies related to fighting COVID-19.
The department is also looking at restructuring loans given through the Small Enterprise Funding Agency (SEFA) for up to six months and assistance targeted at informal businesses, which was due to be published by Friday.
Monama says businesses that are not fully compliant with registration tax or UIF requirements will be linked with government agencies to assist them to comply.
Last Sunday, it was announced that the funds for the Rupert family donation will be administered by Business Partners, the SMME finance provider that was formed out of the Small Business Development Corporation (SBDC) in 1981, and has links to the Rupert family dating back to the late 1970’s through Johann Rupert’s father, the late business icon and industrialist, Dr Anton Rupert.
The Oppenheimer family said its donation will be administered by the major banks to their SMME client through the South African Future Trust.
It will offer loans to employees, although these will be held by the SMME.
Sipho Nkosi, 35, a small business owner based in Kwa Thema, Springs, said he has resorted to carrying his own costs through the lockdown.
Nkosi runs two booming food businesses in the area, both selling grilled chicken.
The larger of the two businesses, Chow Pozi was established in 2015, while the second, Spaaikos Delicious, opened its doors in January this year, and has four permanent staff members.
Having been in business since 2012 and involved in the transport business and road construction, Nkosi says the lockdown is the biggest crisis he has ever faced.
He notes that the timing of the announcement, allowing only three days to prepare, as well the fact that his newer business had no reserves, did not allow him enough time to prepare for the lockdown.
Nkosi says government would require a massive information campaign, including using agents who can travel to businesses, to reach small and especially informal businesses.
Nkosi re-opened his business over the weekend to sell take aways amid relaxation of regulations
Government describes Qualifying Small Enterprises as businesses making less than R5 million in revenue per year, while small and medium-sized enterprises tend to be those making less than R50 million per year, depending on the sector of operation.
HOW THE AID WORKS:
Small Business Development R 500 million Fund offers:
* SMME Relief Financing: Which entails a soft-loan facility; aimed at supporting existing businesses to ensure they stay afloat during pandemic;
* Business Growth and Resilience facility, targeting SMMEs who produce or supply health care and related products that are required to combat the spread of Covid-19;
* Restructuring of SEFA funded loans – Payment moratorium/holiday given to SEFA funded SMMEs for a period of 6 months to reduce the burden of instalment/loan obligation during the Covid-19 period;
* Informal sector: providing tailor made facilities for informal business owners, self-employed, hawkers and Spaza shops.
LINK: www.mybindu.org.za; www.dsbd.gov.za; www.sefa.org.za; www.seda.org.za .
SMMEs are required to register on the government’s database platform:
National Empowerment Fund (NEF)
- The NEF has set aside R 200 million to assist Black Owned Manufacturers of Identified Priority Products in the medical equipment and food Industry to assist through Covid 19 crisis
- Funding is for working capital machinery and equipment
- Funding is a loan of up to R 10 million with a 12 month payment holiday
- Loans are issued at 0% interest over the first year and at 2,5% with a maximum repayment period of 60 months
- Business must meet NEF’s funding criteria of being majority black owned, with preference given to women and youth owned businesses.
- The NEF has approved R 10 billion worth of funding over the past 14 years
Rupert Family R 1 billion
- The Fund is administered by Business Partners
- Financing is in the form of loan finance
- Over the past 38 years, Business Partners has funded 71 000 transactions worth R 19,5 billion
- 40% of its business is with existing clients
Oppenheimer R 1 billion
- Administered as the South African Future Trust by South Africa’s major banks
- The Fund will offer loans to individual employees deposited directly to their account, the loans will be held by the SMME employer
- SMMES are advised to enquire with their banks.
