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:
- 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.
The coronavirus slowdown affects us all. But, it’s especially tough for South African business owners.
Every day we speak with business owners who are struggling. They’re worried about paying salaries and sustaining their SMEs in a post-coronavirus world.
In response, the government, private sector, and citizens have come together to offer support when small businesses need it most.
At Lulalend, we’re working hard to understand how to provide the services and support that matter to business owners right now. Our affiliate programme is an important part of this effort.
In this post, you will learn:
- How to become a top Lulalend affiliate
- How Lulalend affiliates help SMEs grow during difficult times
COVID-19 SME support: What are we doing at Lulalend?
To support SMEs during this difficult time, we have:
- Continued to provide business funding
- Set up a Facebook group for South African SMEs to connect and support each other
- Created content that covers the latest on COVID-19 SME support
- Lobbied for government and private sector to join forces to help SMEs
We also depend on affiliates like you.
As a Lulalend affiliate, you play an important role in our COVID-19 support programme.
If you’re a business advisor or an accountant, you are already giving SME owners valuable guidance about the future of their businesses. Now more than ever before, business owners depend on your advice to make decisions about their short-term financial futures.
As a Lulalend affiliate, you can also tell them about fast business funding.
How top affiliates support South African SMEs
Lucille Bester, Lulalend’s Head of Sales, shared practical strategies used by Lulalend’s most successful affiliates.
Bester said top affiliates made their customers aware about online funding and shared relevant business finance content with their clients.
Here’s a summary of the top points:
1. Share your referral link widely
A simple technique to spread the word about online funding is to share your referral link whenever you communicate with new customers.
Bester suggested the following tactics:
- Add your link to your email signature
- Create a website button to display your link prominently
2. Use customer data
Perhaps you’re a business consultant or an accountant. It’s your job to sort through your customer’s data to steer them in the right direction, added Bester.
In some sectors, SMEs are busier than ever because they deliver goods and services that are in high demand due to the outbreak.
“Maybe there’s a client who’s missing out on new contracts or opportunities because of cash flow. Here’s where you can support them to secure funding,” said Bester.
3. Ensuring a perfect match
Our top affiliates understand the minimum requirements, which include:
- R500 000 minimum annual revenue
- One year trading history
Unlike banks, we don’t ask business owners to submit stacks of paperwork. All you need is three months of bank statements.
4. Teach your audience about business finance
Securing business funding can be a complex journey.
Your SME network can easily become overwhelmed with endless information from different sources.
“Your clients trust you. And they trust you to make ethical decisions in the interests of their businesses,” said Bester.
On top of connecting your clients with responsible funders, let your audience have access to content that serves their funding needs.
We’ve written about:
- How to apply for a business loan in South Africa
- The most common mistakes SMES make when they apply for loans
- How fintech speeds up fintech funding
Our blog is updated weekly with new content tailored to help SMEs get the funding they need to grow. When you give business owners more information about the minimum requirements, they stand the best shot at accessing finance.
5. Subscribe to our communication channels
At Lulalend, we believe in the power of community.
That’s why we set up SA Small Business Unlocked.
Plus, we publish the latest news on SME funding on the Lulalend Facebook and Twitter channels.
Our weekly email updates SMEs about new promotions and useful content.
It’s not always hard to find the right funder for your needs. We create content that aims to help SMEs make the best decision for their business.
6. Write a Lulalend review
By writing an honest, helpful Lulalend review, you can expand your own network.
Your profile will be noticed in the search results. And review based on your real engagement with the company positions you as a trusted contact for SMEs searching for funding.
Connect South African SMEs with easy access to capital
Are you ready to spread the word about fast business funding?
As a Lulalend affiliate, you have the power to save SMEs. Together, we can expand access to finance for businesses throughout South Africa.
Small businesses can now apply for the government’s R100 billion COVID-19 loan guarantee scheme.
If your turnover is less than R300 million, you qualify for this COVID-19 SME support programme.
It is a joint initiative by the National Treasury and the banks. The South African Reserve Bank will manage the scheme and release annual reports revealing how much funds each bank has issued to SMEs under the scheme. This report will include default rates.
On 12 May, the National Treasury, the Banking Association of South Africa, and the South African Reserve Bank, released a joint media statement about the COVID-19 support scheme.
“Funds borrowed through this scheme can be used for operational expenses such as salaries, rent and lease agreements, contracts with suppliers, etc. Government and commercial banks are sharing the risks of these loans,” reads the statement.
Does your SME qualify for the scheme?
To qualify, small businesses must meet the following criteria:
- Existing relationship with the bank
- Good standing with their bank, e.g., up to date with other loan payments
- Good standing with SARS
- Must be in financial distress because of COVID-19
Loans will be released in three installments. SMEs get five years to pay off the loan, and banks may ask for collateral, according to a FAQ about the scheme.
Other conditions include an interest rate fixed at the repo rate plus 3.5%. Banks cannot change this rate;
“Businesses may not use these loans to pay dividends, make investments, pay bonuses or pay off other loans that the business may have,” reads the FAQ.
COVID-19 SME funds update
The announcement comes after the National Department of Small Business said it was running out of funds for COVID-19 support.
Khumbudzo Ntshavheni, the Minister of Small Business Development, told MPs the R530 million the department has set aside for small business relief was not enough to meet the demand, reports Fin24.
“Our pot or kitty is too small…we are working with National Treasury to make sure more money in the scheme is available”.
On Twitter, many SMEs have expressed frustration with the process. Some say they have not received feedback on the status of their applications. The department said all business owners should have heard the outcome of the applications by 1 May.
The department publishes a progress report on the debt relief funds on its website,
These were the latest debt relief scheme figures available on 13 May:
- Number of SMEs approved for funding: 1268
- Approved amount: R 433m
- Number of applications: 26039
- Complete applications in progress (processed by SEFA): 6741
- Incomplete applications resulting: 19298
Ntshavheni said the Unemployment Insurance Fund was helping to support SMEs.
The UIF released the following progress report on COVID-19 support:
- R11-billion had been paid out over 2million workers
- R100 million has been held back because the UIF can’t verify these workers bank details
- R2 billion can’t be paid out because the UIF is still waiting for more details from companies
For more on accessing the government relief, read our simple guide on COVID-19 SME Relief options.
The UIF COVID-19 fund has received applications for 1.75 million workers.
The Unemployment Insurance Fund (UIF) has processed 59,000 applications for UIF payments during the lockdown, reports Moneyweb. Since the start of the COVID-19 lockdown, the UIF has paid out R4.4 billion to 1.1 million workers.
On 30 April, the Department of Employment and Labour released an update on the COVID-19 Temporary Employee Relief Scheme, COVID-19 TERS.
Although a FAQ by the Department of Employment and Labour and the UIF stated the deadline for applications was 30 April, application would remain open for the next few months.
Thobile Lamati, the Director-General of Employment and Labour, said:
“We would like to make it clear that we have not reached the deadline yet. The period will depend on the Memorandum of Understanding signed, but it shall not exceed 3 months, which is the period given for the Covid-19 TERS relief benefit.”
Lamati said he was worried about the large number of incomplete applications. There are more than 300,000 workers who might not be able to claim UIF payments because of missing details. Lamati said they were waiting for employers to complete these applications.
The UIF hopes its online application portal will speed up the process.
Employers and workers can access the following information online:
The names of companies that have been paid. The UIF introduced this feature because they received many queries from workers about the status of the company’s COVID-19 TERS applications.
The schedule of each approved claim, so employers can check how much each employee will get paid.
Thulas Nxesi, the Minister of Labour, said too few companies were applying for the COVID-19 UIF payments. Nxesi was speaking at a media briefing on 28 April, reports IOL.
“We are not paying the whole amount. We pay 38% because it is a relief and we had budgeted for a period of three months. We pay according to the payroll submitted. 20 000 workers entitled to pay have not done so. Some employers have not even dared to help their employees,” said Nxesi.
If you want more information on the COVID-19 UIF funds, read our blog post on applying for the UIF payments.
A government body wants to make it easier for fintech firms to test new products that aren’t covered by existing regulations.
Today, (23 April 2020), the Intergovernmental Fintech Working Group (IFWG) called on SA finance companies and startups to apply for the Regulatory Sandbox, during a live stream.
In the sandbox, companies will be exempted from regulations while they test new services. The goal is protect consumers while making way for new products that will improve financial services.
The IFWG is made up of the following financial services organisations:
- National Treasury
- Financial Intelligence Centre
- Financial Sector Conduct Authority
- National Credit Regulator
- South African Reserve Bank
- South African Revenue Service
During the live stream, Gerhard Van Deventer, Senior Fintech Analyst at the South African Reserve Bank, and Kagiso Mothibi, Head of the Fintech Department at the Financial Sector Conduct Authority, outlined the process.
Mothibi explained companies in the sandbox will be able to test products and services that don’t fit into existing regulations. Testing will start on 1 July. The testing period is six months.
“Regulators can provide exemptions in order to safely test the products over that six-month period.”
However, exemptions won’t be available for all regulations.
“We will review these on a case-by-case basis,” said Mothibi.
Van Deventer summarised the criteria for participating companies:
- Business to Consumer: increase competition, improve financial inclusion
- Business to Business: lower costs, increase efficiency, and improve compliance
Products must be fully developed and should “challenge the existing framework”, added Van Deventer.
Plus, the idea should be different from existing services on the market.
Van Deventer encouraged applicants to conduct their own research so they can highlight how their service is not covered by current policies.
Once testing has been completed, the group may lobby for regulatory change.
It’s hoped the unit will “shape regulations that provide clear benefits to financial services,” added Mothibi.
Although several countries have launched similar initiatives, South Africa was unique because of the collaboration of several financial bodies.
In addition to the regulatory sandbox, the IGFW has a regulatory guidance unit: a single entry point for fintech companies to ask questions about regulations
Dr Arif Ismail, chairperson of the IFWG, said fintech firms had an especially important role to play as “local and global economies navigate this period of uncertainty”.
In a report jointly released by the IFWG in February, it states:
“SA has a small but fast-growing fintech industry, presenting considerable benefits and risks.
As a result, regulators need an understanding of the fintech landscape in South Africa in
order to manage risks in a way that does not stifle innovation.”
The closing date for applications for the first round of the regulatory sandbox is 15 May.
For more information visit the IFWG website.
Government and private sector have launched interventions to support your business during the coronavirus outbreak.
On 22 April, President Cyril Ramaphosa announced a set of new coronavirus relief measures. These include a R2bn support package for SMEs and spaza shop owners, a R200 billion loan scheme with banks, and expanded tax relief.
The situation is evolving fast. To stay up to date we suggest you regularly check our FAQ page for breaking updates on coronavirus SME support.
On this page we provide a summary of the relief schemes available to your SMME, plus additional resources.
To view full details of the financial relief options available, all in one place, check out our Covid-19 funding and support options guide.
You’ll learn more about each fund, eligibility, application process and criteria.
Jump to the section for more detail:
Get UIF benefits
SMEs can apply to the Unemployment Insurance Fund’s COVID-TERS benefit to cover salaries.
Type of support:
- Employees are paid on a sliding scale between 38% to 60% of their salaries.
- The lower the salary the higher the COVID-19 benefit.
- Companies apply on behalf of employees.
Additional reading: Applying for Coronavirus UIF Benefits? Here’s Everything Your SME Needs to Know
Defer your tax payments
Another way to increase cash flow is to defer your provisional and PAYE payments.
Type of support:
- You can pay 15% of your total estimated taxable income for the tax year for your first payment. This is due from 1 April 2020 to 30 September 2020.
- You can pay 15% of your tax payment for the second provisional tax payment. This is due between 1 April 2020 and 31 March 2021.
Type of support:
- SMES can defer 35% of their PAYE liability, starting with the payment due on 7 May 2020 and ending with the payment due on 7 August 2020.
- SMEs will need to pay the deferred tax liability to SARS in equal instalments over six months. The first payment must be made on 7 September 2020
Additional reading: COVID-19 Support for South African SMEs: Do you Qualify for Tax Relief?
A range of government departments have introduced coronavirus funds.
Department of Small Business Development
The Department has two funds: the SMME Relief Scheme and the Business Growth Facility.
Debt/SMME Relief Scheme
The Department of Small Business Development’s SMME Relief Scheme aims to help businesses cover expenses during the outbreak.
Type of support:
- Soft-loan facility for six months
- You apply for funds to pay salaries, rent, buy raw materials or municipal accounts
- It opened in April 2020
Business Growth/Resilience Facility
Type of support:
- The facility covers funds for working capital, stock, bridging finance, purchase order finance, and capital equipment finance.
- The interest rate is at prime less % pa.
- Terms will depend on SME cash flow.
Additional reading: Coronavirus Support for South African SMEs: List of Government Funds
Department of Tourism
The Department of Tourism has allocated R200 million to its COVID-19 Tourism Relief Fund.
Type of support:
- The COVID-19 Tourism Relief Fund is once-off grant funding, capped at R50,000 per entity.
- Funding can be used for fixed costs, operational costs, and supplies.
- This fund is open from 7 April to 30 May.
Department of Agriculture
The Department of Agriculture has established an Agriculture Disaster Support Fund for smallholder farmers.
Type of support:
- Grant funding capped at R50,000 per farming operation
- Funding can be used to complete current production cycle
- This fund is open until 22 April.
For more information, see this press release on the Agriculture Disaster Support Fund.
The Rupert and Oppenheimer families have each donated R1 billion rand to help South African SMEs. Because the Rupert fund is no longer accepting applications, we will focus on the Oppenheimer fund, the South Africa Future Trust.
Here’s an overview of the criteria:
- SMEs must be an existing client of the fund’s partner banks: Absa, Nedbank, FNB, Standard Bank, and Mercantile Bank.
- Annual turnover must be below R25 million per year
- SMEs must be trading for at least two years
- Should demonstrate link between business distress and COVID-19
For more information, please visit the SAFT website
Additional resources on coronavirus funding and support for SMEs