Alert Level 4 restrictions: Businesses need more financial support to save jobs
We welcome the announcement by President Cyril Ramaphosa of the reopening of the UIF Covid-19 TERS scheme which we have been calling for and which will be a lifeline to many businesses and employees in South Africa.
Of course, the devil is in the detail and so we await further information from the Department of Employment and Labour on the specific criteria for the disbursement of these critical funds.
The fact is that the UIF Covid-19 TERS scheme will not go far enough to support businesses and their employees during this difficult time.
Many businesses, particularly in the hospitality and liquor sectors have already been hard-hit with significant job losses during the Covid-19 pandemic. This has been compounded by weeks of no income under the Alert Level 4 restrictions and by the ongoing restrictions on the liquor sector. The recent public unrest has also severely impacted businesses who have been damaged by looting or forced to close as a precautionary measure.
A snap poll, conducted by our Department of Economic Development and Tourism, of over 400 businesses in mainly the accommodation and restaurant sectors showed that:
- The Alert Level 4 restrictions prevented almost a third of responders from legally operating;
- Roughly 40 per cent of responding businesses were closed temporarily due to the Alert Level 4 restrictions;
- Approximately two thirds of responders say they will lose between 75 – 100 per cent of their expected revenue for July and August 2021;
- Almost a third of responders have had to retrench staff.
And so, we will be writing to President Cyril Ramaphosa to consider additional financial support measures and the further relaxation of restrictions where it is safe for businesses to operate.
We believe that the proposed additional financial support measures will be essential to ensure financial liquidity for these businesses and could be the difference between them remaining open or closing their doors permanently.
The medium-term financial support measures we would like considered should apply retrospectively to businesses who have been impacted by the Alert Level 4 restrictions since the 28 June 2021 and would include:
- Temporary VAT payment holiday - The South African Revenue Service (SARS) should provide businesses with a temporary payment holiday on their regular VAT payments. This payment holiday should extend for a few months after the lockdown measures are lifted in order to give businesses time to recover their cash flow while not incurring penalties from SARS.
- Temporary Skills Development Levy payment holiday - A temporary payment holiday, or full exemption, from paying their contribution towards the Skills Development Levy. This would be applicable to businesses with an annual payroll bill of R500 000 or more and as this amounts to 1% of these businesses’ payroll obligations it would have a significant impact on their liquidity during this time.
- Temporary excise tax payment holiday - As excise tax is paid on production of alcohol and not on sale, a temporary payment holiday on excise taxes will have a significant impact on liquidity and cash flow obligations for businesses in the liquor industry.
- New fund for small and informal businesses - National government should announce the creation of a new fund which would be applicable to small and informal businesses, subject to specific criteria, who fall outside the abovementioned measures.
The Western Cape government has focused on getting the balance right between preventing the spread of Covid-19 while keeping the economy as open as possible, saving both lives and livelihoods. The impact of closures on the hospitality and liquor sectors is severe and without financial support could lead to the permanent closure of many businesses and the loss of many jobs.
As such, we appeal to President Ramaphosa to consider and announce the above business relief measures and the easing of restrictions to allow businesses to operate safely so they can save jobs and contribute to rebuilding our economy in South Africa.
Listen to soundbyte from Minister David Maynier:
Spokesperson for the Provincial Minister of Finance and Economic Opportunities
(Responsible for the Provincial Treasury and the Department of Economic Development and Tourism)
Cell: 071 087 5150