South African SMEs asked government’s COVID-19 support scheme for over R4 billion to keep their doors open.

However, the Department of Small Business Development could only afford to award R513 million in the first round of its coronavirus SME support package.

Now, the department is working closely with the National Treasury to help SMEs survive the knock of the COVID-19 pandemic.

The funds were part of the department’s Debt Relief scheme. At the end of last month, the department announced the first phase of the scheme had closed.

The department provided a report of the scheme:

  • Total number of applications received – 35 865
  • Total number of valid applications received – 14 451
  • Total number of applications approved – 1 497

Those 1 497 SMEs will receive R513 million.

SMEs need R3,6 billion for salaries

The difference between the number of the total number of applications and the number of valid, complete applications is because 21 414 applications were incomplete. Those incomplete applications will be referred to the Small Enterprise Development Agency (SEDA). Then, SEDA will help small business owners complete their applications.

An assessment by the Small Enterprise Finance Agency (SEFA) found there was a funding shortfall of R4.4 billion during the first phase of this coronavirus business funding support.

SEFA identified the key reasons SMEs needed funds:

“The balance of the 12 954 complete applications requires an estimated budget of R4.4 billion but a bulk of the applications require assistance with payment of salaries to the total value of R3.6 billion,” reads the department’s statement.

To help SMEs pay salaries, the department has teamed up with the Unemployment Insurance Fund (UIF).

This means SMEs that did qualify for the UIF’s COVID-19 SME fund will now be able to access support to pay salaries. Many small businesses did not meet the requirements “due to non- compliance”, says the department. One example of non-compliance is that SMEs owned money to the UIF.  They must agree to pay that debt to the UIF before they access the COVID-19 salaries support.

There was another category of SMEs seeking funds: businesses that only needed some support to get back on their feet. This group of SMEs required R800 million.

“The DSBD will commence direct engagements with these SMMEs to ensure dedicated support for these enterprises to go back to business as President Ramaphosa has announced the gradual re-opening of the economy…The DBSD will continue to engage with National Treasury on this funding gap that is still required to fund those who have already applied.”

The Debt Relief scheme was opened in April to provide working capital to SMEs that were affected by COVID-19.

The COVID-19 support was for the following purposes:

  • Salaries
  • Rental
  • Municipal bills

The department said it would release the names of the business who had applied on 29 May. But at the time of publishing this post on 1 June, this list was not yet available.

New COVID-19 support initiatives

Meanwhile, the Minister of Small Business Development announced new COVID-19 support schemes.

Here is an overview of these sector-specific schemes:

  • Small-scale bakeries and confectioneries support scheme: small businesses can apply for equipment finance or working capital
  • Informal and small-scale clothing and textile support scheme: open to seamstresses, designers, art designers, shoemakers, etc. SMEs can use the funding for new business opportunities, courses to improve key skills, and business credit
  • Automotive aftermarkets support: open to all auto mechanics, diesel fitters, panel beaters and spray painters. Funds can be used for working capital

These schemes include business development services too, like trade tests. For more detail on the qualifying SMEs in each category, see the full press release here.

You can find application forms for these COVID-19 support schemes here.

 

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