Human Capital Development

Ramaphosa’s SMME Covid19 Debt Relief Finance Scheme Not Comprehensive

Covid19 has accelerated humanity’s transformation, the virus has changed the way we work, communicate and socialise. Life will never be the same again.

Businesses, especially small startups are feeling the brunt of the scurge, big companies like Edcon don’t even know if their doors will open once the mandatory lockdown has passed. This is the new reality for many a businesses across the globe.

I would like to take this opportunity to congratulate the efforts that have been made by the Ramaphosa administration in containing the spread of the virus. The last time I saw a well-oiled SOuth African government was in 2010, when we hosted the FIFA World Cup.

The FIFA World Cup and Covid19 have diametrically opposed effects on society but they have shown us that we have a capable government when they decide to act. Well done to these efforts, well done to the frontline first responders and service people who are putting themselves at risk whilst assisting the infected and afflicted. Thank you for your efforts to keep the country running during this lockdown.

A few days ago I received the official application guideline for the Department of Small Business Development’s  SMME debt relief  finance scheme. I had heard President Ramaphosa announce it and was excited to read and see what was needed to qualify.

To my dismay, the most discriminatory clause was included in this otherwise amazing initiative to scaffold small business from collapse. Two of the main qualification criteria state that:

  1. Company must be 100% owned by South African Citizens
  2. Employees must be 70% South Africans

I quickly understood the rationale behind number 2 above. It is meant to achieve the objective of providing a safety-net for South African citizen employees during this trying time.

Number 1, got me thinking. I immediately burst into the Socratic mode, questions oozing from the zenith of my brain. I took these questions, tossed and turned them like hot potatoes, all in the name of testing  the efficacy of this requirement. I asked myself the following questions:

  1. What about companies owned by permanent residents?
  2. What about non-citizen owned startups with more than 70% South African employees?
  3. What does it mean to own a comapny?
  4. Isn’t a company founded in South Africa and registered at the CIPC a South African company regardless of who owns it?

My understanding of the debt relief financing scheme was to ensure businesses don’t fold so as to protect the employees. So if the South African employee is the target beneficiary then how does company ownership take centre-stage?

Are South African employees who work for non-citizen owned companies being punished for working for the wrong entities? Is this not defeating the purpose for which the initiative was set up?

Unfortunately, I am not privy to the statistics of citizen Vs non-citizen small business entities in terms of employment creation for South African citizens, size, turn-over and all other attributes used tomeasure business performance.

Are we sure that the contribution of non-citizen owned companies to the employment of South AFrican citizens is negligible and their exclusion is not tantamount to recklessness by the originators of the document?

Is this requirement implying that a South African founded and registered company by say, a permanent resident does not deserve to be saved?

I am sure this requirement was not included to harm anyone but in this time of crisis, in our frantic efforts to resolve problems we might miss key components that will adversely taint our efforts, thus my article serves as a nudge to the Ramaphosa government to re-check this defining requirement which might in actual fact be a hindrance to achieving the objective of protecting employees from poverty.

My Suggestions:

Change Company must be 100% owned by South African Citizens

to

South Africa registered small businesses, priority will be given to high growth enterprises that employ the most citizens

For those that have not seen the official document, please download it from Guidelines on COVID Relief Scheme

Covid19 has accelerated humanity's transformation, the virus has changed the way we work, communicate and socialise. Life will never be the same again. Businesses, especially small startups are feeling the brunt of the scurge, big companies like Edcon don't even know if their doors will open once the mandatory lockdown…
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