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SA lockdown | Covid-19 funding measures put in place to buffer battered economy

Article by Property24

South Africa will be under 21 days of lockdown from midnight on Thursday – with businesses in for a rough time as measures to break the spread of Covid-19 get serious. 

On Monday evening President Cyril Ramaphosa addressed the nation detailing South Africa’s next step in its action plan to curb the spread of Covid-19 – including the lockdown of all but essential workers. See the full list here.

“It’s tough – but it’s for the best,” says Gerhard Papenfus, Chief Executive of the National Employers’ Association of South Africa (NEASA).

“After extensive deliberations, based on what they know, they took the best decision under the circumstances. We must make the best of it. A three-week lockdown can be regarded as a balancing act between containment of the virus, protection of South Africans and measures aimed at fortifying the economy against the inevitable disruption to manufacturing, productivity, growth and employment,” says Papenfus.  

Measures to be implemented to soften the blow for employers and employees alike are as follows:

  • SA has set up a Solidarity Fund, which South African businesses, organisations and individuals, and members of the international community to combat the spread of the virus – in addition to what is being done in the public sector. To get things moving, Government is providing seed capital of R150 million and the private sector has already pledged to support this fund with financial contributions in the coming period.
  • The Rupert and Oppenheimer families donated R1 billion each to assist small businesses and their employees affected by the coronavirus pandemic.
  • A safety net is being developed to support persons in the informal sector, where most businesses will suffer as a result of this shutdown. More details will be announced as soon as we have completed the work of assistance measures that will be put in place.
  • To alleviate congestion at payment points, old age pensions and disability grants will be available for collection from 30 and 31 March 2020, while other categories of grants will be available for collection from 01 April 2020. 
  • Temporary Employee Relief Scheme setup – this will see a special dispensation for companies that are in distress because of COVID-19. It will enable companies to pay employees directly during this period and avoid retrenchment.
  • Any employee who falls ill through exposure at their workplace will be paid through the Compensation Fund.
  • Commercial banks have been exempted from provisions of the Competition Act to enable them to develop common approaches to debt relief and other necessary measures.
  • Many large companies that are currently closed have accepted their responsibility to pay workers affected.
  • Reserves within the UIF system to be used if necessary to extend support to those workers in SMEs and other vulnerable firms who are faced with loss of income and whose companies are unable to provide support. Details of these will be made available within the next few days.
  • A tax subsidy of up to R500 per month for the next four months for those private sector employees earning below R6,500 under the Employment Tax Incentive will help over 4 million workers.
  • The South African Revenue Service will also work towards accelerating the payment of employment tax incentive reimbursements from twice a year to monthly to get cash into the hands of compliant employers as soon as possible.
  • Tax compliant businesses with a turnover of less than R50 million 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 over 75 000 small and medium-term enterprises.
  • A temporary reduction of employer and employee contributions to the Unemployment Insurance Fund and employer contributions to the Skill Development Fund are being considered.
  • The Department of Small Business Development has made over R500 million available immediately to assist small and medium enterprises that are in distress through a simplified application process.
  • The Industrial Development Corporation has put a package together with the Department of Trade, Industry and Competition of more than R3 billion for industrial funding to address the situation of vulnerable firms and to fast-track financing for companies critical to our efforts to fight the virus and its economic impact.
  • The Department of Tourism has made an additional R200 million available to assist SMEs in the tourism and hospitality sector who are under particular stress due to the new travel restrictions.
  • The South African Reserve Bank has also proactively provided additional liquidity to the financial system.
  • The banking system will remain open, the JSE will continue to function, the national payment system will continue to operate and the Reserve Bank and the commercial banks will ensure that bank notes and coins remain available. Read the full speech here.

Regional Director and CEO of RE/MAX of Southern Africa, Adrian Goslett says, “I commend the president for taking such a proactive measure against this pandemic. After speaking to Dario Castiglia, Regional Owner for RE/MAX Italy, I was convinced and firmly believe that a full lockdown is the answer to flattening the contamination curve and making sure that our hospitals do not get overrun by new cases.”

While Goslett welcomes the lockdown from a health and safety perspective, he also recognises the strain this lockdown will put on businesses and the greater economy.

He encouraged real estate professionals to do what they can to protect the state of the housing market.

‘Draft OTPs with a suspensive condition’ 

“The housing market will inevitably take a knock over this time, especially if the Deeds Offices close and property transfers are delayed until they reopen. Many buyers will also be reluctant to sign an OTP without ever seeing the home in person. To protect buyers who purchase homes over this time, agents can draft OTPs with a suspensive condition that stipulates that the purchase will only go ahead once the home has passed a physical home inspection which can be conducted once the lockdown has been lifted.”

“I back the president in his decision to launch a full lockdown. I believe that it is the most responsible course of action in response to this pandemic. As business owners and entrepreneurs, it is our duty to support this decision while doing what we can to keep our economy afloat by planning for businesses continuity after this period of isolation is over,” says Goslett.

‘No overreaction’

Papenfus says some may argue that this measure amounts to an overreaction.

“However, taking cognisance of the situation in Italy, the current global epicentre of the pandemic, this seems not to be the case. The Italians blame inaction regarding restriction of movement and a lack of appreciation of the seriousness of the pandemic, as the reasons for the life and death predicament they find themselves in. 

“Due to the government’s fiscal constraints, there is not much government can do to alleviate the plight of those affected. Of concern is, what if, three weeks from now, we haven’t achieved the desired result? What happens if the infection curve shows a downward trend during the lockdown period, but increases again thereafter? What then?

“It is, however, not for us to answer this question now. What we have is three weeks in which we all have to make the best of this dire situation,” says Papenfus.