LETTER: A fast way to get money to afflicted SMEs
Offer a special dispensation, effective immediately, that owners of retirement capital can make a once-off, tax-free withdrawal
SA and the world is facing the biggest crisis of our generation. Based on media reports, more than 1-million South Africans may lose their jobs in the next few weeks as the government-mandated shutdown to combat Covid-19 closes major sectors of our economy. Some of them possibly forever.
The same is happening elsewhere in the world. However, foreign governments have been able to move very quickly in getting financial aid to consumers and businesses. For example, the US is planning a fiscal stimulus of more than $1-trillion that could involve a “helicopter-drop” of $1,000 for every citizen.
In Hong Kong, all citizens received a cash payment of $1,300 at the end of last month. In Europe, targeted measures implemented by a variety of countries include mortgage and debt repayment holidays; state loans and credit guarantees; income subsidies for affected workers; tax deferrals; and social security payment deferments and subsidies.
In SA, the sole intervention thus far has been a radical cut of 1% in interest rates by the SA Reserve Bank, which is to be welcomed. But much, much more needs to be done, and very rapidly. The state of SA’s depleted fiscus prevents direct intervention by the state to help the ailing sectors hurting most as a result of the ban on social gatherings, flights from abroad and other measures to curb the rate of infection of the coronavirus.
This is where we need some radical thinking, and it won’t cost the government a cent. A great percentage of owners of these small to medium business, many now facing closure, have been using the tax incentives on offer over the years (one hopes) to build up retirement capital in retirement annuity, pension and provident funds. I do not know the exact amount involved, but a good guess would run into the hundred of billions, if not trillions, of rand.
Why not announce a special dispensation, effective immediately, that owners of such investments can make a once-off, tax-free withdrawal of, say, R250,000 or even R500,000? This will enable owners of shops, restaurants, coffee shops, bars, hotels, guest lodges and other businesses to stay afloat and, more importantly, keep their staff employed for three to six months until the economy recovers and normal human activity recovers.
Such owners will not get access to any other kind of capital in these times.
What is the point of having a large amount invested in retirement capital when you could lose your business and credit record in the near future? With the help of the asset management industry and advisor network in SA, such a move could release a large amount of money in a very short space of time.
Brenthurst Wealth Management