COVID-19 SME Support: R4 billion Business Funding Gap

COVID-19 SME Support: R4 billion Business Funding Gap

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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.

 

COVID-19 SME Support: Is the R100bn Scheme Right for Your SME?

COVID-19 SME Support: Is the R100bn Scheme Right for Your SME?

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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.

 

5 Ways to Rebuild Your SME During COVID-19

5 Ways to Rebuild Your SME During COVID-19

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How do you even begin to rebuild your SME during COVID-19?

Some business owners have had weeks without turnover. Others are not sure when they can start trading again.

And even if you’re operating right now, you don’t know whether or not level 5 will force you to shut your doors in a few weeks.

Your fears are shared by thousands of SMEs.

Statistics South Africa asked business owner about the impact of COVID-19:

  • 85,4% reported turnover below normal
  • 46,4% reported temporary closure or paused trading
  • 30,6% said they can survive less than a month without any turnover
  • 54,0% can survive between one and three months

Covid-19 has changed everything about how we do business, and it’s not going away anytime soon.

So, we’ve gathered  advice from experts to help you forge a path in a new world.

1. Assess your situation

No business is untouched by the impact of COVID-19.

On an episode of CNBC Africa’s Business Tomorrow, Xolisa Nqodi, managing director of Shesha Tuks, said:

“It’s been really difficult for a small business like myself. We started seeing a negative impact on our operations since the last week of February. The last five weeks have not been easy for us…now that we are  starting our operations again it’s forced us to look at our business with a slightly different outlook.”

How has your business changed? Have a look at your SME right now, from profits to marketing budgets to staff.

2. Develop a two-year COVID-19 SME plan

Once you’ve completed an honest assessment of your SME, it’s time to get to the next step: preparing to run a business during the age of COVID-19.

On an episode of Business Day TV,  Pavlo Phitides, CEO of Aurik Business Accelerator, said SMEs needed to have a longer term view.

“The only thing we can be sure of is that Covid-19 is here to stay forever, and forever in a business life is two years. We’re going to be governed on the access of the economy based on the capacity of our health services to deal with the crisis as it unfolds and emerges…We will open the economy and close parts of it.”

Phitides said this was the only certainty.

“Hold onto that, it’s all that counts and forget everything else.”

To respond to these constant changes, business owners should come up with red, amber, and green strategies.

A red stage is a full lockdown.

“In the red stage, make sure you have staff who are able and capable to work remotely. If you can’t, the anxiety then rises. As the business owner, you are carrying the cost of that personnel, you are carrying the cost of the business.”

Another fact was that successful business practices before COVID-19 might no longer be effective.

“What led to your success coming  into COVID-19…will have to be very different from the way you will find success coming out of COVID-19.”

Phitides said this included practices, business leadership, and customer behaviour.

“The environment has changed, customers have experienced fundamentally different changes ..If you don’t adopt what you did and you do well in that new reality,  you could find yourself isolated from the opportunities that are going to emerge as we move out of lockdown into the new economy.”

3. Think about your next pivot carefully

When you’re coming up with ideas, it’s tempting to move into high-demand sectors.

But Nic Haralambous, serial entrepreneur, advises against this.

“If you weren’t already making masks, you’re probably not going to own the market for masks for the next 18 months. Stick to what you’re good at but try and evolve it.”

Haralambous was speaking with Business Day’s Michael Avery.

Study your industry. What are your competitors offering? What are the trends? What gaps can your business fill?

Maybe this means bringing a project forward, said Haralambous.

“What is the next thing you were going to do? What was on your development roadmap that you can bring forward to help accelerate the progress of your business because it is going on and off for the next two years.”

Haralambous suggested examining your existing skills.

“What tools do you have in your business that you can retool in different kinds of opportunities  that can generate revenue for you in the medium term?

“You need to be brutal with yourself. Be honest about your business survival opportunity…start retooling as quickly as you can.”

4. Determine your funding need

SMEs need billions of rands to keep their doors open.

More than 30% of businesses told Stats SA they had applied for government funding.

This week, the Minister of Small Business Development Khumbudzo Ntshavheni , told Parliament the department’s relief scheme was running out of the money, reports Fin24.

A good place to start is to determine your funding needs.

  • What does your cash flow look like over the next three to six months?
  • Do you need working capital to meet a backlog of orders?
  • Perhaps you need funding to fulfil a surge in demand?

5. Look after yourself

There’s a lot of uncertainty right now.

If you’re feeling worried and stressed, you’re not alone.

Personal development and business coach Charmaine Soobramoney has been helping SME owners navigate COVID-19.

“We all need to acknowledge that this is real, and it’s normal to go through the phase of anxiety. Lives have been impacted, the economy has been impacted, people are losing their jobs…People have reasons to feel anxious,” said Soobramoney in this video interview with Lulalend.

Soobramoney called on business owners to move towards accepting the new reality.

“This is the situation. Being anxious is not going to help me move forward in the way that I need to.”

She shared the mindset used by business owners who were finding traction:

“I’m in this situation. I have no control over it but I have control over how I choose to view my business , view the future, and grab opportunities that present itself.

“When you’re in this fearful state, you feel like the world is closing in. Yes, it is but you have control over how you open it.”

If you’re looking for fast access to funding, learn more about how Lulalend can help you grow. Click here for more information on how we work with business owners like you.

Reimagining a post COVID-19 access to market strategy

Reimagining a post COVID-19 access to market strategy

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Business owners have gone through quite a journey with COVID-19 restrictions.

Customers’ needs have changed and South African regulations are evolving as we move from lockdown into lower levels of restriction. 

We chatted to Marc Ashton about reimagining an access to market strategy in a post COVID-19 world.

Previously a South African financial journalist and entrepreneur, Marc heads up Decusatio, an online financial problem-solving platform.

In this interview you’ll hear some inspiring stories about how companies like Uber are innovating and partnering during this time.

You’ll also hear some tips on how to adapt your business strategy as we move into and beyond level four restrictions. 

 

 

Join a community of business owners

Share your thoughts on this topic and stay updated on the latest COVID-19 information in our Facebook community, SA Small Businesses Unlocked.

COVID-19 Level 4 Lockdown: 7 Things SMEs Need to Know

COVID-19 Level 4 Lockdown: 7 Things SMEs Need to Know

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Are you starting to trade during level 4 COVID-19?

If your SME is getting ready to operate, there are a few things you should know to protect your staff and keep your business open.

For a detailed overview of Level 4, please see our guide.

What does COVID-19 level 4 mean for your business?

On 23 April, President Cyril Ramaphosa announced a phased return to work.

During the COVID-19 outbreak, South Africa would operate on a risk level strategy, said Ramaphosa.

Here’s a list covering all the industries that may return to work if you’re still unsure about your SME.

The National Government has also published the following snapshot of “permitted” industries.

Agriculture, manufacturing, and construction:

Financial and business services, transport, and repair:

Retail and food services:

Other key level 4 lockdown points:

  • Alcohol sales remain prohibited, but you can export wine.
  • Exports allowed for all agriculture, agro-processes, fishing, and forestry products
  • Accommodation establishments remain closed to the public

So, how many businesses are going back?

Between 18% and 25% of SMEs will go back during level 4, said Mike Anderson of the NSBC on Hot 91.9 FM. And it’s estimated 1.5 million people will return to work this week.

7 things South African business owners need to know about level 4 lockdown

If you’re getting ready to open shop this week, there are strict health and safety rules. Companies that fail to follow these measures have been shut down.

You need to apply for permit

You need to apply for an essential services certificate on the Bizportal.

To apply, complete the application form on Bizportal.

Communicate with staff

Communication with staff is critical, said Robyn Stone, Head of Talent at Lulalend.

Stone suggested the following points to consider when communicating with staff:

  • Honesty
  • Transparency
  • Optimism

Kindness was the most important, added Stone:

“The state of current affairs is heavy on the heart, so it’s important to be kind at all times. Not only as the Business Owner or HR delivering the comms, but by encouraging kindness between colleagues and teams. When you’re communicating remotely, things like empathy can get lost in translation so it’s important to express warmth in your tone,” said Stone.

Develop a back to work plan

All companies will need a return to work plan.

As you prepare to return to the office, you must also designate a COVID-19 compliance officer.

This person will need to:

  • Make sure your company is following health and safety measures
  • Develop a plan for phased return of staff

Stone suggested creating a shared document so all employees can check updates to the return to work plan.

The number of employees you have will influence your back to work plan.

Companies with fewer than 10 employees, for instance, need to comply with less requirements. These are discussed in clause 40 of this Gazette from the Department of Employment and Labour.

Work from home first

Staff who can work from home should do so, states the regulations.

Pregnant and vulnerable employees should be allowed to work from or work from an isolated space in the office, reports the National Employer Association of South Africa’s COVID-19 toolkit.

All your workers need a permit to come to work

You will need to complete a permit for each staff member considered essential. They will need to carry the permit and a form of identification when they travel to work.

Maintain social distancing

Some industries may only allow a percentage of workers to return to the office.

All workplaces must cater to social distancing requirements, said Nxesi.

“With regard to social distancing, workplaces must be arranged to ensure a minimum of 1½ meters between workers. If this is not practicable, physical barriers must be erected and workers must be supplied free of charge with appropriate Personal Protective Equipment (PPE).”

Stone encouraged companies to consider creating a shared calendar for when staff would be in the office.

Getting to work

Regulations have been relaxed for people travelling to work by public transport or car.

Updated regulations include:

  • Public transport can operate between 5am and 7pm
  • All passengers must wear a face mask
  • Minibus taxis can take 70% load
  • For metered taxis and Ubers, a 5-seater can take 2 passengers and a driver
  • Buses can take 70% of the number of passengers they are licensed to carry

Everyone can now access emergency repair services.

You can find additional COVID-19 resources for SMEs here:

Coping with COVID-19: Tips and Advice from a Business Coach

Coping with COVID-19: Tips and Advice from a Business Coach

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This is a time of major uncertainty for business owners. We invited Charmaine Soobramoney, a personal development and business coach, to share her thoughts on some of the issues raised by our community. 

Charmaine has a diverse set of skills and experience. Her focus is on shaping, positioning and supporting individuals and organizations for excellence and growth.

Some of the topics we touched on in this interview are:

  • How to deal with anxiety about your business
  • What are ways to keep your staff motivated
  • How to have hard conversations with your staff
  • Could now be an opportunity for growth in any way?

Watch the full video here, and join our SA Small Businesses Unlocked community where you can engage with Charmaine directly if there’s any other questions you might have: