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COVID-19: Extreme measures in South Africa

24 March 2020
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On 23 March 2020, President Cyril Ramaphosa announced a 21-day lockdown in South Africa. With some specified exemptions, everyone will have to stay at home and all shops and businesses will be closed, with some exceptions. We will provide the full list of exempted persons and businesses and as soon as it is available. In particular, we will unpack the categories of ‘other persons necessary for the response to the pandemic’ as well as the full extent of the exemption for those involved in the production, distribution and supply of food and basic goods, essential banking services, the maintenance of power, water and telecommunications services, laboratory services, and the provision of medical and hygiene products.

In terms of the lockdown, individuals will not be allowed to leave their homes except under strictly controlled circumstances, such as to seek medical care, buy food, medicine and other supplies or collect a social grant. We expect that further details on the circumstances under which individuals can leave their homes will be included in the gazetted regulations and directives under the Disaster Management Act, 2002, and will update our clients as soon as these details are available.

All shops and businesses will be closed, except for:

  • pharmacies,
  • laboratories,
  • banks,
  • essential financial and payment services, including the JSE,
  • supermarkets,
  • petrol stations,
  • health care providers, and
  • companies that are essential to the production and transportation of food, basic goods and medical supplies.

Companies whose operations require continuous processes, such as furnaces or underground mine operations, will be required to make arrangements for care and maintenance to avoid damage to their continuous operations.

Firms that are able to continue their operations remotely should do so.

Provision will be made for essential transport services to continue, including transport for essential staff and for patients who need to be managed elsewhere.

Prevention measures

  • South African citizens and residents arriving from high-risk countries will automatically be placed under quarantine for 14 days.
  • Non-South Africans arriving on flights from high-risk countries we prohibited a week ago will be turned back.
  • International flights to Lanseria Airport will be temporarily suspended.
  • International travellers who arrived in South Africa after 9 March 2020 from high-risk countries will be confined to their hotels until they have completed a 14-day period of quarantine.

Economic measures

The first phase of the economic response (and further measures are currently under consideration) includes the setting up of the Solidarity Fund (Fund) (www.solidarityfund.co.za), which South African businesses, organisations and individuals, and members of the international community, can contribute to. Government is providing seed capital of ZAR 150 million and the private sector has already pledged to support this fund with financial contributions in the coming period. The Rupert and Oppenheimer families will contribute ZAR 1 billion each to assist small businesses and their employees affected by the coronavirus pandemic. We will monitor and advise our clients on mechanisms put in place by the Fund to distribute and manage the funds.

A safety net is being developed to support persons in the informal sector, where most businesses will suffer as a result of this shutdown. More details will be announced as soon as we have completed the work of assessing the assistance measures that will be put in place.

Compensation

Government is in consultation on a proposal for a special dispensation for companies that are in distress because of COVID-19. Through this proposal employees will receive wage payment through the Temporary Employee Relief Scheme, which will enable companies to pay employees directly during this period and avoid retrenchment.

Any employee who falls ill through exposure at their workplace will be paid through the Compensation Fund.

Banking sector

Commercial banks have been exempted from provisions of the Competition Act to enable them to develop common approaches to debt relief and other necessary measures. Government has met with all the major banks and expects that most banks will put measures in place within the next few days.

Loss of income

In the event that it becomes necessary, the reserves within the UIF system will be utilized to extend support to those workers in SMEs and other vulnerable firms who are faced with loss of income and whose companies are unable to provide support. Details of these will be made available within the next few days.

Business in distress

Using the tax system, Government will provide a tax subsidy of up to ZAR 500 per month for the next four months for those private sector employees earning below ZAR 6 500 under the Employment Tax Incentive. This will help over 4 million workers.

The South African Revenue Service will also work towards accelerating the payment of employment tax incentive reimbursements from twice a year to monthly to get cash into the hands of compliant employers as soon as possible.

Tax compliant businesses with a turnover of less than ZAR 50 million will be allowed to delay 20% of their pay-as-you-earn liabilities over the next four months and a portion of their provisional corporate income tax payments without penalties or interest over the next six months. This intervention is expected to assist over 75 000 small and medium-term enterprises.

Government is exploring the temporary reduction of employer and employee contributions to the Unemployment Insurance Fund and employer contributions to the Skill Development Fund.

The Department of Small Business Development has made over ZAR 500 million available immediately to assist small and medium enterprises that are in distress through a simplified application process.

The Industrial Development Corporation has put a package together with the Department of Trade, Industry and Competition of more than R3 billion for industrial funding to address the situation of vulnerable firms and to fast-track financing for companies critical to our efforts to fight the virus and its economic impact.

The Department of Tourism has made an additional ZAR 200 million available to assist SMEs in the tourism and hospitality sector who are under particular stress due to the new travel restrictions.