A R500 billion economic support package for SA
President Cyril Ramaphosa has announced a R500bn economic support package for SA. Here is how it makes a difference to your business:
Last night (21 April 2020), President Ramaphosa announced an economic support package amounting to 10% of South Africa’s GDP. The support package has been primarily directed at funding the health response to the coronavirus and stabilising the economy, with particular focus on assisting the poor and vulnerable and supporting smaller businesses.
Here’s what you need to know:
The big picture:
- R500 billion has been allocated towards COVID-19 response measures. R130 billion will be funded through reprioritisation of spending from the existing budget with the balance of the funds to be raised from the Unemployment Insurance Fund and external finance institutions;
- The R500 billion will be allocated towards:
- Funding the health response to the coronavirus; including the procurement of personal protective equipment for health workers and the bolstering of the health care system to care for those infected by the virus;
- The provision of emergency water supply, increased sanitisation of public transport and facilities, and providing food and shelter for the homeless;
- An increase in the amount paid to social grant beneficiaries over the coming months. An amount of R50 billion has been allocated to this category of relief, with increased grants being paid to beneficiaries for the next 6 months;
- The protection of jobs and the creation of further jobs;
- A loan guarantee scheme to assist enterprises with operational costs, such as salaries, rent and the payment of suppliers; and
- Additional tax relief measures.
Here’s how it affects your business:
- Loan funding via the banking system:
- R200 billion will be made available to enterprises in the form of a loan guarantee scheme.
- The loans are meant to assist enterprises with operational costs, such as salaries, rent and the payment of suppliers.
- In the initial phase, companies with a turnover of less than R300 million a year will be eligible, and the scheme is expected to support over 700,000 firms and more than 3 million employees.
- The president’s speech did not give detail on how these funds can be accessed other than to say that a number of the banks are ready to roll out the product before the end of the month. We will keep you informed as to any developments in this regard.
- Tax deferrals (Pay As You Earn (“PAYE”) and Corporate Tax)
- The previous turnover threshold for tax deferrals has been increased to R100 million (previously R50 million) and the proportion of the PAYE payment that can be deferred has been increased to 35% (previously 20%);
- Businesses that exceed the turnover threshold of R100 million can apply to SARS for deferrals of their tax payments. These applications will be evaluated on a case by case basis.
- VAT refunds will be accelerated
- Skills Development Levy and Carbon tax
- A four-month holiday for companies skills development levy contributions and a three-month delay for the filing and payment of carbon tax will be introduced.
It would appear that these relief measures are still only available to tax compliant businesses. We therefore urge you to confirm that your tax affairs are fully up to date should you wish to access any of the relief measures available via the tax system.
The detail relating to the implementation of the relief measures, announced in the president’s speech, still need to be published. As this additional information becomes available, we will be publishing the details on our website. Click here to access our dedicated COVID-19 page.
As always, please feel free to contact any of our partners should you need further assistance.
We wish you and your families well over the coming weeks.
Partner, PKF Octagon