Source: Helema Wasserman, Fin24, 25 July 2021, photo credit: Norton Rose Fulbright
On Sunday night, President Cyril Ramaphosa announced a range of measures to assist businesses which have been hit by the pandemic, as well as those specifically affected by the recent unrest in KwaZulu-Natal and Gauteng.
Ramaphosa said that “deliberate, planned and coordinated acts of violence designed to create the conditions for unrest” led to the loss of more than 300 lives, the looting of shops, warehouses and factories, damage to critical infrastructure, and disruption of the country’s economy.
“We are still counting the cost of this violence, and coming to terms with the destruction that it left in its wake. We have a duty to support those affected by this violence, and ensure that it never happens again.”
While many businesses are expected to be compensated by the state-owned SA Special Risk Insurance Association (Sasria), which covers damage to clients as a result of social unrest, many smaller businesses are not insured.
Ramaphosa announced that government will provide assistance to these businesses, including informal ventures. Government has set aside money for this purpose and will soon announce a mechanism to assist these businesses.
“Many of these businesses have lost everything, and will not be able to rebuild on their own. We will not abandon them in their time of need,” he added.
He also announced a range of other measures to help businesses recover during the pandemic
Business survival payouts
Ramaphosa said small and medium-sized businesses affected by the pandemic will get access to a “once-off business survival” payment. Details of how this funding mechanism will work have not been announced.
Employment tax incentive
Ramaphosa announced that the Employment Tax Incentive (ETI) will be “expanded” for a period of four months.
The ETI, which has been in place since 2014, encourages businesses to employ workers by giving them a Pay-as-You-Earn (PAYE) tax refund.
Currently, for every worker who earns less than R6 500 and is younger than 30 years, qualifying employers get R1 750 a month in the first year of employment and R1 250 in the second year of employment from the SA Revenue Service (SARS). This is done by claiming refunds on the amount of PAYE they paid to SARS.
After 24 months, the incentive is R750 for these workers. For workers older than 30, the incentive is also R750.
Ramaphosa says the incentive amount will now be increased by up to R750 per month.
“This will encourage employers to hire and retain employees, especially those in the retail and hospitality sectors which have been worst affected.”
Payment of PAYE taxes for a period of three months will be deferred to provide businesses with additional cash flow, with an automatic deferral of 35% of PAYE liabilities for employers with revenue below R100 million.
Excise tax holiday
While Ramaphosa ended the fourth alcohol sales ban on Sunday night, he also announce that 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”.
Ramaphosa said the interventions are designed to extend as much relief as possible to individuals and businesses that are in need of support, without compromising South Africa’s fiscal sustainability.
Ramaphosa also hinted that further initiatives “to address poverty, accelerate the implementation of reforms, drive inclusive growth and create jobs” are planned. “We will shortly be able to make further announcements in this regard.”
On Sunday evening, he announced that the Social Relief of Distress Grant (SRD) will be reinstated until March 2022.
The grant of R350, administered by the South African Social Security Agency (Sassa), will also be extended to unemployed caregivers who currently receive child support grants.