14 April 2020 by Business Rescue, Restructuring & Insolvency Newsletter

COVID-19 - What the State is doing for you

Since the onset of COVID-19 (Coronavirus) restrictions, the State has been rolling out measures to alleviate the negative effects of these restrictions.

We thought it would be useful to provide a summary of what is out there – particularly what is available to assist businesses. What is provided below is for high level reference. Further details will be made available upon inquiry. More measures will be rolled out and we will inform you of these as they happen.

The main thrust of these measures has been to promote a coordinated and efficient response to the pandemic, as well as alleviate impacts on the financial consequences to businesses and labour relations. This article highlights the most relevant business-oriented regulations.

Trade, industry, competition and tax

  • Hospitals and healthcare facilities are exempted from certain practices that would ordinarily be anti-competitive in order to co-ordinate, as part of the COVID-19 response, the optimal allocation of healthcare facilities such as medical care and pharmaceutical resources.
  • The DTI has also published regulations to protect consumers and customers, under threat of severe penalties, from unconscionable, unfair, unreasonable unjust and improper commercial practices in relation to specified food, emergency services, medical supplies and emergency clean up products by profiteering from shortages of supply through excessive pricing or inequitable distribution. Enforcement of complaints under Section 8(1)(a) of the Competition Act ie for excessive pricing, will be give urgent priority.
  • The DTI has further published regulations giving a block exemption to banks to co-ordinate otherwise anti -competitive practices to alleviate the negative impact on customers of the pandemic. This is aimed at assisting customers to manage their finances (and more specifically their debt), during and post COVID-19. Measures are provided to allow continuing operation of essential payment systems, bank notes to ATMs and electronic payment systems. Debt relief is catered for through permissible co-ordination of steps to extend credit, provide payment holidays, and limit asset repossessions. No specifics are provided – it is up to the banking sector to implement these measures in response to the pandemic.
  • Similar regulations have been published to alleviate the impact of COVID-19 on the retail property sector – with the focus on designated retail tenants including small independent retailers – specifically clothing, footwear and home textile retailers, personal care services and restaurants - to manage their finances due and post the national disaster. This permits otherwise anti-competitive practices aimed at payment holidays, rental discounts, limitations on evictions and lease variations aimed at protecting viability. Once more the regulations do not direct what should be done – they merely permit such arrangements to be made.
  • Regulations have been published dealing with the provision of quarantine facilities by the hotel sector.
  • Certain medical care goods, like face masks and hand sanitisers, cannot be exported without a permit.
  • CIPC will not issue notices in terms of section 22 to companies believed to be carrying on businesses which is temporarily insolvent but still trading where such insolvency is caused by COVID-19.
  • Two Bills have been introduced to provide for tax relief under COVID-19, namely the 2020 Draft Disaster Management Tax Relief Bill and the 2020 Draft Disaster Management Tax Relief Administration Bill (Tax Relief Bills). The relief measures are aimed at assisting, amongst others, small to medium sized businesses. The relief provided for in the Tax Relief Bills was discussed by our Tax & Exchange Control Department in their alerts dated 3 April 2020 and 9 April 2020 and deal with the following:

Deferral of employees’ tax and provisional tax obligations for tax compliant small to medium sized businesses, as discussed in our Tax & Exchange Control Alert of 3 April 2020;

Expansion of the employment tax incentive regime, as discussed in our Tax & Exchange Control Alert of 3 April 2020; and

Donations to funds established for purposes of assisting with COVID-19 disaster relief efforts, as discussed in our Tax & Exchange Control Alert of 9 April 2020.     

  • Certain measures have been put in place to enable customs assistance and trade in essential goods during lockdown, as well as reduction in port congestion linked to sanitisation measures. SARS has issued a binding general ruling to assist exporters who may be affected by the lockdown from a VAT perspective, which is discussed in our Tax & Exchange Control Alert of 27 March 2020.

Small businesses

The following is noteworthy:

  • The Small Business Development Department has made funding available aimed at assisting businesses which are negatively affected, directly or indirectly, due to the Coronavirus pandemic. In order to get this assistance, a business must be registered with CIPC, and SARS and UIF compliant (this may bring into the net smaller businesses that were previously operating informally). Rental and payroll relief is contemplated. What will be made available or its terms is not disclosed. Perhaps this will emerge in due course.
  • The Small Business Development Department has also made available funding to set up small businesses meeting the qualifying criteria which will be able to take advantage of supply opportunities caused by shortage of goods in the local market. These measures are aimed at supporting smaller businesses who can assist in the manufacture and supply of goods that are needed towards the management of the impact of COVID-19.
  • GNR 450 is aimed at assisting SMME’s operating grocery stores and spaza shops, including those operating without licenses in the informal sector. This sets out guidelines permitting operation to provide food and necessities, opening hours, staff engagement and so forth.

The State has been pro-active in initiating measures to cope with the COVID-19 pandemic. What the stated aid packages lack is specificity as to what will actually be given. Perhaps the government does not itself know yet because it does not know what it has available to give, so it cannot create unrealistic expectations. Delivery will however be more relevant and useful than words, so people seeking assistance need to keep a close eye on developments. We will update our clients as soon as we know.

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