In his address on Sunday the 25th of July, President Cyril Ramaphosa announced a range of measures to support the recovery of the economy which has taken a knock from both the COVID-19 lockdown restrictions and the devastating riots and looting in Gauteng and KwaZulu-Natal.
Today the Minister of Finance, Tito Mboweni, provided more details of these measures which will cost the fiscus approximately R38 billion, and the key points are set out below:

Small Business Support Grant
The Department of Trade, Industry and Competition (dtic) and the Department of Small Business Development (DSBD) will put together a package of R2.3bn to extend support to small businesses not covered by SASRIA. The package is composed of R1bn of re-prioritised funds and additions of R1.3bn to the dtic and DSBD baseline budgets. The National Youth Development Agency (NYDA) has also launched a fund, the “Youth Enterprise Rebuilding Fund” for youth-owned businesses with no insurance cover. Once this incentive is released we will share further information with our readers.

Insurance related to the looting
For businesses with SASRIA insurance, government will ensure that SASRIA is able to honour all its obligations and will provide whatever support is necessary in this regard. A special dispensation from SASRIA allows certain insurance companies to settle claims of up to R50 000 immediately. Mboweni estimates the claims value to be R15-20bn.

Employment Tax Incentive (ETI)
The ETI has been expanded for a period of four months to include any employee earning below R6 500 and has been increased to R750 per month. The objective is to encourage employers to hire and retain employees, especially in the retail and hospitality sectors which have been worst affected. This expansion will come at an estimated cost of R5bn.

PAYE taxes
The payment of PAYE taxes is deferred for a period of three months to provide businesses with additional cash flow, with an automatic deferral of 35 per cent of PAYE liabilities for employers with annual revenue below R100 million.

Excise duties payable by the alcohol sector
The payment of excise taxes by the alcohol sector will be deferred for a period of three months, to ease the burden on the sector as it recovers.

COVID-19 TERS scheme
The COVID-19 TERS scheme was extended for those sectors which were affected by Alert Level 4 restrictions during the past 28 days. Applications for this period are open, and the UIF will facilitate payments as quickly as possible. This extension will come at an estimated cost of R5.3bn.

Humanitarian Crisis Relief Fund
The government is contributing R400 million to the Humanitarian Crisis Relief Fund established by the Solidarity Fund. This is to assist with the immediate needs of communities affected by both the pandemic and the recent violence. Government will set aside dedicated funds for this purpose, and we will soon announce a mechanism for these businesses to apply for support.

Implementation of the Economic Reconstruction and Recovery Plan
The impact of recent events on the South African economy has made the implementation of the Economic Reconstruction and Recovery Plan a focus area. The government will take further measures to address poverty, accelerate the implementation of reforms, drive inclusive growth and create jobs - and will shortly be able to make further announcements in this regard.

The Social Relief of Distress Grant
The grant will be reinstated to provide a monthly payment of R350 until the end of the current tax year. Unemployed caregivers who currently receive a child support grant from the government will also now be eligible to apply for this support. The government will need an estimated R27bn to pay these grants.

Extension of S12I compliance period
The government is looking to adjust the conditions required to claim the Section 12I tax incentive to assist businesses to remain eligible to claim the operational difficulties they have faced through the pandemic. It is our view that the compliance period for the incentive will be extended to 4 years.

Please get in touch with us to find out more about how we can assist you to access this support.

Cova Advisory