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Welcome COVID-19 relief merely scratching the surface

14 April 2020 Author :  

One of the important things that we have see come out of the COVID-19 Crisis is that big business has put their hands up to offer financial relief to SMMEs.

Last week, the TMA-SA published a press release which provided extensive details about how SMMEs can access these funds. However, it seems as if the relief that is being offered – as welcome and generous as it is – is merely scratching the surface of the true extent of the COVID-19 crisis.

Rupert relief over subscribed
An article by Fin24 pointed out that the R1 billion fund set up by the Rupert family to assist small businesses financially impacted by Covid-19 has been oversubscribed just days after it opened.

The fund, known as the Sukuma Relief Programme, is administered by Business Partners Limited, a leading risk finance company for small and medium enterprises, co-owned by billionaire Johann Rupert.

The article added that applications for the Sukuma programme officially opened on Friday 3 April, but it has since reached its capacity, with applications exceeding the current available capital of R1 billion, Business Partners said in a statement.

According to the statement, this includes completed applications and applications in progress.

Crippling impact
The Fin24 article points out that Business Partners managing director, Ben Bierman, said that the high number of applications received by the programme reflects the "crippling" impact of the Covid-19 crisis on SA small businesses.

"Just three days after the online portal was opened for applications, the Programme has already received in excess of 10 000 applications from formal sole proprietors, close corporations, companies and trusts," Bierman told Fin24.

The combined value of the two application categories of the programme - close corporations and sole proprietors exceeds R2.8 billion. "This exceeds the available donated capital of R1 billion almost three times over. As such, we have decided to suspend access to the application portal with immediate effect," Bierman added.

'Severely' oversubscribed
Bierman told Fin24 that Business Partners will assess the applications over the next seven days. If there is capital available, in the case that some applicants could not be verified or approved, then the programme will be opened for applications again.

The Fin24 article pointed out that Bierman called on big businesses and corporations to contribute funding to the Sukuma Relief Programme. "We realised when engaging with our clients that the situation is dire, but we have been surprised by the sheer number of SMEs that are in desperate need of assistance," he said.

"We unfortunately had to close the online application portal as the programme is already severely oversubscribed, and in keeping the portal open, we run the risk of not being able to meet expectations.

"As such, we are making a public plea to other big businesses that are looking to support local SMEs during this critical time ... Now is the time to get involved and support each other," Bierman told Fin24.

The article added that the Sukuma programme will provide qualifying sole proprietors a non-repayable grant of R25 000. Formal close corporations, companies and trusts are eligible for an unsecured loan that ranges between R250 000 and R1 000 000, with no repayment obligations or interest incurred for the first 12 months - this is in addition to a R25 000 grant, according to Bierman. The repaid funds will be used to support other small businesses through challenging times.

Major beneficiaries
It is not all bad news though. Another article by Fin24 pointed out that over 20 000 people stand to benefit from the R1 billion Oppenheimer fund.

The article pointed out that some small businesses are already receiving financial assistance from The South African Future Trust (SAFT), established by Nicky and Jonathan Oppenheimer, to offer an initial R1 billion in support to small and medium enterprises impacted by the coronavirus pandemic.

In a statement issued on Monday, the SAFT said that it had received over 10 000 applications from small, medium and micro enterprises since applications opened on 3 April.

"Our partner banks – ABSA, FNB, Nedbank, and Standard Bank – began processing applications on Friday 3rd April. The first applications were approved over the weekend, with the first payments reaching SMME employees over the course of today," the statement read.

The SAFT expects to approve in excess of R250 million loans over the next 48 hours. "This would equate to over 20 000 individuals already benefitting from SAFT support."

Major partners
The Fin24 article pointed out that Nicky and Jonathan Oppenheimer pledged R1 billion to support small medium and micro enterprises at the end of March, shortly after government announced a 21-day lockdown to curb the spread of the coronavirus. The South African Future Trust was formally established with an initial R1 billion in support, the Oppenheimers said.

The SAFT partnered with four major banks, namely Absa, Absa, FirstRand Bank, Nedbank and Standard Bank, and clients of these banks can apply for funding.

"The SAFT will transfer funds directly to employees of participating SMMEs, via interest-free loans where employees themselves carry no liability," an initial statement read.

Any loans repaid to the SAFT will be used to support initiatives that focus on employment creation until all funds are disbursed, Fin24 previously reported.

TMA-SA commentary
The relief that has been offered to SMMEs is welcome and commendable as it will go a long way in supporting future business efforts after this difficult and very testing period.

Where do we go from here? South Africa has already been downgraded to junk status and many countries around the world are extending their COVID-19 lockdown periods as they fear a second wave of infections.

The simple truth of the matter is that most of these countries are in a better position to afford this as they have structurally sound economies. South Africa was struggling with lacklustre economic growth and high levels of poverty and inequality even before the COVID-19 outbreak. This unfortunate situation will only be exacerbated by the lockdown.

Government has now extended the lockdown period and embarked on a massive COVID-19 testing programme order to assess the true magnitude of the crisis to better inform future decision making. Companies will need objective advice when it comes to debt restructuring and effectively navigating the crisis that they find themselves in. The value of turnaround practice managers has never been greater.

Bruce Berry CEO TMA-SA



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