The Ripple Effect: Policy changes across the globe, will South Africa follow suit?

The economic impact of COVID-19 and the need for policy reform

14 Apr 2020 7 min read Business Rescue, Restructuring & Insolvency Newsletter Article

On 5 April 2020, Her Majesty Queen Elizabeth II delivered a statement to the world, wherein she made a profound observation. She highlighted that the fight against COVID-19 is like no global crisis she has faced before. What makes COVID-19 unique is that all nations have come together in a common endeavour. The world is united, combining advances in science and our instinctive compassion to heal, and to overcome the virus and its devastating effects. It is therefore unsurprising that various nations have been looking to one another for guidance.

In an effort to curb the effect of COVID-19 on businesses and economies, governments across the globe have undertaken to adopt and amend various pieces of legislation. We discuss these policy changes below.

As yet, South Africa has not followed suit from an insolvency and business rescue perspective. The question is, to what extent can we expect similar policy changes going forward?

A brief consideration of legislative reform in similar jurisdictions

The United States of America (USA)

With the World Health Organization warning that the USA has the potential to become the new epicentre of the COVID-19 pandemic, there have been some noteworthy policy changes adopted in different states and jurisdictions in an effort to alleviate the effects that COVID-19 has had on the US economy to date. The CARES Act (Coronavirus Aid, Relief and Economic Security) (CARES Act) has been adopted in the USA in order to support both businesses and individuals through government funding schemes. The CARES Act has provided for relief in many areas including, inter alia:

  • Paycheque Protection, allowing for eligible businesses to maintain their payroll and certain overhead expenses through the period of emergency; and
  • Allowing the deferral of employer taxes for 2020, with 50% of payroll tax payments for 2020 being due in 2021 and the remaining 50% being due in 2022.

Other policy changes include:

  • The Federal Reserve (Fed) has reduced interest rates to essentially zero. The rate of emergency lending at the discount window for banks has been reduced by 125 basis points to 0,25% and the term of loans lengthened to 90 days;
  • The Fed also cut the reserve requirements for many banks to zero; and
  • There have been many Loan Mortgage Corporations that have implemented a 60-day suspension of foreclosures/evictions and plans to reduce/suspend mortgage payments for up to twelve months for those affected by COVID-19.

The United Kingdom (UK)

The UK has adopted a series of temporary measures to combat the disruption caused by COVID-19. These include:

  • The Monetary Policy Committee voted to cut Bank rates to 0,1%;
  • Subject to eligibility, an allowance for a three-month VAT payment deferment has been adopted;
  • Business rates holidays for retail, hospitality and leisure businesses have been extended for the 2020 and 2021 tax year;
  • The Coronavirus Business Interruption Loan Scheme has been temporarily introduced in order to provide loans, overdraft facilities and other financing options to SMEs;
  • The Bank of England will, under the new COVID-19 Financing Facility, buy short term debt from larger companies, allowing companies to finance short term liabilities;
  • Under the new Coronavirus Bill, commercial tenants unable to pay their rent due to COVID-19 will be temporarily protected from eviction; and
  • The Prudential Regulatory authority set out supervisory expectations that banks should not increase dividends or other distributions in response to policy actions.

Asia Pacific


On 22 March 2020, Australian Treasurer Joshua Frydenberg announced amendments to the Corporations Act 2001 to provide temporary relief for financially distressed businesses caused by COVID-19. As a result, the Coronavirus Economic Response Package Omnibus Act (CERPO Act) was passed by Parliament on 23 March 2020. The amendments introduced by the CERPO Act will apply for a six-month period but may be extended or have effects beyond this timeline. The CERPO Act introduces the following amendments:

  • An insolvent trading safe harbour, constituting a 6-month moratorium on insolvent trading liability for directors in respect of debts incurred “in the ordinary course of the company’s business”;
  • The current minimum threshold for creditors to issue a statutory demand on a company has also been increased from $2,000 to $20,000 for the next six months;
  • Companies will have six months to respond to a statutory demand. This is an increase from the previous 21-day timeframe which is a precursor to winding up proceedings being commenced by creditors; and
  • The Treasurer has been given instrument-making power to amend provisions of the Corporations Act 2001 to provide relief from, or modify, obligations under that Act.


On 7 April 2020, the Singapore government introduced the COVID-19 (Temporary Measures) Act 2020 (the COVID-19 Act). These temporary measures will remain in place for six months and may be extended for up to twelve months. The COVID-19 Act makes the following amendments to bankruptcy and insolvency proceedings:

  • The monetary threshold for company bankruptcy filings has been increased from S$10,000 to S$100,000;
  • The time period to respond to statutory creditor demands has been extended from 21 days to six months;
  • Directors will temporarily be relieved from their obligations to prevent their companies from trading while insolvent if the debts are incurred in the company’s ordinary course of business, during the prescribed period and before the appointment of a judicial manager or liquidator of the company. However, they remain criminally liable if the debts are incurred fraudulently; and
  • The contractual rights of banks, other than the right to commence legal action for default on a loan covered under the COVID-19 Act, are not affected by the temporary measures. Importantly, the banks’ rights to charge fees and interest for non-payment or late payment of loan obligations are not affected by the COVID-19 Act.


Following the declaration of a state of emergency on 14 March 2020, the Spanish government has introduced several Royal Decree-Laws (RDLs) to mitigate the impact of COVID-19. The RDLs make the following amendments to bankruptcy and insolvency proceedings:

  • A three-month moratorium on mortgage payments for habitual residence for borrowers experiencing difficulties in making mortgage payments as a result of COVID-19. This moratorium has also been extended to:

(i)    individuals who are professionals or entrepreneurs as it pertains to their professional/ business premises; and

(ii)   mortgages for the acquisition by individuals of housing to be rented when the owner ceases to receive the rent as a result of COVID-19.

  • During the moratorium, lenders cannot demand mortgage payments or any repayments of principal or interest and no interest or late payment interest will accrue;
  • A three-month moratorium on repayments for consumer credit and other non-mortgage loans for individuals experiencing difficulties in making payments as a result of COVID-19, with no interest or late payment interest accruing;
  • Creditors’ petitions for compulsory liquidation will not be allowed until two months have passed after the state of emergency has ended, and debtors’ own filings will be given priority even if submitted later; and
  • While the state of emergency is in effect, debtors are not required to file for insolvency proceedings (within two months of insolvency), even where they applied for protection from creditors under Spanish insolvency law and the stipulated negotiation period has elapsed.

Legislative measures already taken in South Africa

Much like the nations mentioned above, South Africa has embarked on several policy amendments to not only combat the spread of the virus, but also to protect business and individuals from its devastating economic effect. The most noteworthy legislative measures taken by the South African government thus far are as follows:

The Department of Trade, Industry and Competition (DTIC) published regulations (Regulations) in terms of section 10(10) of the Competition Act 89 of 1998 (Competition Act) whereby the retail property sector has been exempt from Chapter 2, more specifically, sections 4 and 5 of the Competition Act, which sections ordinarily prohibit entities in horizontal and vertical relationships from entering into agreements or engaging in practices which prevent or lessen competition in the market.

Under the Regulations, retail tenants and retail property landlords may conclude agreements allowing for rental payment holidays, rental discounts, limitations on the eviction of tenants and the suspension of or adjustment to lease agreement clauses which are restrictive to the retail tenant from undertaking reasonable measures required to protect viability during the national disaster. Similar block exemptions have been issued to the healthcare and banking sectors as well as the hotel industry. Furthermore, the DTIC has also introduced the Consumer and Customer Protection and National Disaster Management Regulations and Directions under the auspices of the Competition Act and the Consumer Protection Act 68 of 2008, the aim of which is to protect consumers from unfair, unreasonable, improper or unjust commercial practices in response to a surge in demand during the National Disaster.

As mentioned in our previous Newsletter, the Companies and Intellectual Property Commission (CIPC) has undertaken not to invoke its powers under section 22 of the Companies Act 71 of 2008 (Companies Act) and will therefore not be issuing notices to companies where the company has continued to trade even while temporarily insolvent due to COVID-19. A general extension has been provided by the CIPC for business rescue proceedings which commenced, but which did not complete the procedure as stated in section 129 of the Companies Act, until 30 April 2020.


Much like other jurisdictions, South Africa has implemented several general legislative amendments and exemptions in order to combat the economic impact of COVID-19, however South Africa has not implemented any specific legislative amendments from an insolvency or business rescue perspective. It will be interesting to note the ripple effect of the insolvency-related legislative amendments taking place world-wide and the extent to which South Africa will follow suit. Struggling South African businesses will most certainly welcome such type of amendments to our insolvency and business rescue legislation and are accordingly waiting in anticipation whether South Africa will follow suit.

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