No bazookas but some help for SA’s vulnerable
As President Cyril Ramaphosa announced a national shutdown on Monday night along with measures to support the most vulnerable in the economy, the Oppenheimer and Rupert families pledged R1bn each to support small businesses during the crisis.
The large donations by two of SA’s richest families are in addition to the establishment of a Solidarity Fund, which enables well-off South Africans, companies and the international sector to contribute resources to the Covid-19 containment campaign.
The fund will be chaired by Wiphold founder Gloria Serobe and philanthropist Adrian Enthoven. Government has provided R150m in seed capital.
Unlike the US and EU which have aimed fiscal bazookas at their economies, the SA government’s spending efforts are modest and will be directed towards support for the most vulnerable in society: workers who are laid off during the crisis; small businesses in distress; and in the near future those who work in the informal sector.
The key vehicle for this will be the Unemployment Insurance Fund (UIF), which prior to the market crash had R60bn in investments housed at the Public Investment Corporation.
Ramaphosa also announced some measures to assist employers and employees through the tax system and additional funding of R3bn from the Industrial Development Corporation and R200m from the small business department for small companies in the tourism sector.
In proposals on the UIF published at the weekend on the department of labour’s website, the government said it has established a national disaster benefit through which employees who were laid off, either temporarily or permanently would be able to access support at the level of the minimum wage for three months.
If an employee is ill, temporarily laid off or unemployed for longer than three months, the normal UIF benefits will apply. Those who fall ill through exposure at their workplace will be paid through the Compensation Fund.
Distressed companies will also be able to access UIF reserves through the existing training lay-off scheme, which ordinarily removes workers from the payroll for six months, while they access funds equivalent to part of their salary.
Ramaphosa said that the details about this will be made available in the next few days.
Some benefits to employers and employees will flow through the tax system. Employees of businesses in distress who earn below R6,500 will be assisted with a tax subsidy of up to R500 per month for the next four months, using the government’s Employment Tax Incentive — or wage subsidy programme. The government believes this will help more than 4-million workers.
The SA Revenue Service will work towards accelerating reimbursements under the employment tax incentive – or the youth employment scheme — from twice a year to once a month to get cash into the hands of compliant employers as soon as possible.
Tax compliant businesses with a turnover of less than R50m 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 more than 75,000 small and medium-size enterprises, Ramaphosa said.
The government is also exploring the temporary reduction of employer and employee contributions to the UIF and employer contributions to the Skills Development Fund.
While small businesses can be reached through some of these channels, the government is still considering how to reach the most vulnerable who make their living through the informal sector and do not contribute to the UIF.
The UIF Act restricts the use of its funds to those who are shifted into unemployment.
It is here where "most businesses will suffer as a result of this shutdown".
The details of this are a work in progress and will be announced soon, the president said in his address last night.