DA proposal on UIF reprieve approved – more economic support needed after restaurant restrictions

Issued by Geordin Hill-Lewis – DA Shadow Minister of Finance
19 Mar 2020 in News

The Democratic Alliance (DA) welcomes the government’s positive response to one of our proposals, allowing businesses to skip Unemployment Insurance Fund (UIF) payments for the coming months, and expanding UIF coverage to better protect affected workers.

Small and medium enterprises pay tens of thousands of rands to the UIF and this reprieve will be valuable cash flow support for these businesses during this crisis.

Even so, South Africa still needs a comprehensive economic support package that will lessen the economic devastation that this virus will inflict on businesses.

The new disaster management regulations that limit restaurant trading hours and customer numbers will have a truly devastating impact on jobs in this industry.

This underscores how urgent it is that the government presents a comprehensive economic support package to help small businesses weather this storm. This urgency grows by the hour.

A terrible economic cost will be paid in our national effort to contain and beat Covid-19. That cost is already being felt by small businesses and their employees across the country, in every sector and industry. But these small businesses cannot and will not survive if they have to bear the full brunt of this cost on their own. They need support from the government, and it cannot wait.

We have called on the government to match its virus containment plan with an equally comprehensive economic support package.

This package should be expanded to include:

  1. Freeing up funds for disaster management and economic support, by cancelling the planned bailout of SAA of R16,4 billion immediately. It is unthinkable at a time like this to be bailing out failed SOEs while thousands of successful small businesses face ruin.
  2. A nation-wide loan forbearance programme, giving a four month payment holiday on loans for small and medium businesses, in particular property loans, business loans and vehicle loans. By extending the term of loans by four months, and allowing borrowers to pause their payments for those months, businesses and the families they support will receive immediate and very significant financial relief. This will help small businesses maintain the cash flow necessary to stay open and keep paying their employees. It will act as a form of ‘bridging finance’ for these businesses, without each business needing to negotiate terms with their banks individually. Businesses are already flooding banks with requests for payment holidays. Instead of waiting for the flood of requests in the coming weeks, the government, along with the Reserve Bank and the Banking Association should act proactively and announce these relaxed payment terms now. This is fast becoming the preferred intervention of governments across the globe. China, France, Italy, the United Kingdom, several Gulf countries, Canada and others have all enacted programmes similar to this.
  3. If a loan payment holiday programme is enacted, then rental payments can also be paused for four months to help businesses survive. There are of course some property owners who rely on the income from their properties, even if they are not bonded. In these cases, a pause in rental payments, or a reduction in rental payments, would need to be negotiated on a case by case basis. Even so, it would still help for the government to make a statement calling on owners to demonstrate forbearance wherever possible.
  4. The Department of Labour could pause payments to the Worker’s Compensation Fund by small businesses for four months, without affecting workers’ cover under the fund. Payments could be recouped when the economy rebounds.
  5. Now is also the time to raise the VAT threshold for small businesses, from R1 million to R2 million. This would give immediate relief to small businesses.