Covid-19 Factsheet South Africa

Copyright © 2020 Rubix. All rights reserved. COVID-19 Factsheet

South Africa

Country Specifications Elements Details Country South Africa Yes, South Africa is partially under lockdown. Restrictions are currently being eased in levels. The government allowed a partial reopening of the economy Whether the country is/was on May 1, with travel restrictions eased and some under Lockdown (LD)? industries allowed to operate under a five-level risk system. Currently, South Africa is in Level 3 of lockdown, with some businesses and industries reopening with numerous restriction Period of LD Start Date: 26-03-2020

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Government Intervention Elements Details ● South Africa has now allowed citizens to start exercising outside their home and go to places of worship ● The ban on the sale of alcohol was lifted ● Public transport vehicles have been allowed to operate as long as passengers adhere to the rules of social distancing, sanitising, and mask-wearing ● The following services and premises remain closed: ○ Gyms and fitness centres ○ Sports groups and fields and swimming pools—except for training professional athletes ○ Fetes and bazaars ○ Night clubs ○ Accommodation establishments that are not formally accredited and licensed ○ Conference facilities, except for business

use

○ Any on-consumption premises—bars,

taverns, shebeen, and similar

establishments ○ Beaches and public parks Restrictions Imposed in the ● The following restrictions are still in place: Country ○ Domestic passenger air travel for leisure purposes have been restricted ○ Passenger ships for leisure purposes ○ Sporting events ○ Smoking and sale of tobacco products ● All South African borders are closed during the period of lockdown, except for the transportation of essential goods and fuel; inter-provincial travel is banned ● Retail shops and shopping malls must be closed, except where essential goods are sold ● Emergency repair work is allowed to operate, which includes locksmiths, glaziers, roof repairs, plumbers and electricians ● Hardware and car-part stores able to open but only for emergency supplies. ● Retail stores permitted to stay open and sell essential items are barred from selling any other goods

Page 2 of 21 ● Temporary residence visas issued to foreigners residing in high-risk countries—, , Iran, South Korea, , , USA, and —have been withdrawn unless such persons had arrived in South Africa on or before March 15 Restrictions Imposed in the ● Entry to foreign travellers arriving from or Country (continued) transiting through high-risk countries—Italy, Iran, South Korea, Spain, Germany, France, , the US, the UK, and China—has been barred

(Writer 2020) (Al Jazeera 2020)

Economic Stimulus Measures: National Empowerment Fund (“NEF”) Support ● The NEF is making R200,000,000 in loans available for black entrepreneurs to manufacture and supply a range of medical products including medical masks, sanitisers, dispensers and related healthcare products to support the healthcare sector during the COVID-19 crisis

SMME Support Intervention ● The Department of Small Business Development has introduced an “SME Support Intervention” which involves a Debt Relief Fund and a Business Growth/Resilience Facility to mitigate the impact of the expected economic slowdown on Small, Micro and Medium-Sized Enterprises (“SMMEs”) in South Africa. Support extended to the ● The Department has also made over Industries at risk by R500,000,000 available to the Debt Relief Fund, Government and the SMME Finance Scheme will comprise soft-loan funding for a period of 6 months from April 01, 2020. ● The Business Growth/Resilience Facility will provide working capital, stock, bridging finance, order finance and equipment finance to small businesses which supply in-demand medical supplies ● The Department of Tourism has made an additional R200,000,000 available to assist SMMEs in the hospitality and tourism sector.

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Guaranteed Loan Scheme for SMMEs ● President Cyril Ramaphosa announced a R200,000,000,000 loan guarantee scheme in partnership with the major banks, National Treasury and the South African Reserve Bank ● The initial phase of this scheme will provide that companies in good standing with their commercial banks with a turnover of less than R300,000,000 per year will be eligible for this relief

Repo Rate ● The SARB announced a reduction in the repo rate—the benchmark interest rate at which the Reserve Bank lends money to other banks—to 4.25%

Social Relief and Economic Support Package

As per President Cyril Ramaphosa’s announcement on

April 21, 2020, as part of the second phase of measures

taken by the South African Government, this social relief

and economic support package will comprise

R500,000,000,000, which is 10% of the GDP.

Support extended to the Employment-related Measures: Industries at risk by COVID-19 Temporary Employee/Employer Relief Government (continued) Scheme ● Contributions to the Unemployment Insurance Fund (UIF) are required to be withheld by employers in relation to a monthly remuneration value ● Should an employer have to close its operations for a period of 3 months or less and suffer financial distress, employees of the company shall qualify for a COVID-19 TERS Benefit. ● Employees who suffer or are expected to suffer a loss of income as a result of the temporary closure by the employer of its business operations and who were in employment prior to the commencement of the national lock-down on 27 March 2020 are eligible to receive the C19-TERS benefits. ● An employee may only receive a C19-TERS in terms of the directives if the total of the benefit together with any additional payment by the employer in any period is not more than the remuneration that the employee would ordinarily have received for working during that period

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● If the employer’s employees, during the period of lockdown, receive a C19-TERS benefit from a bargaining council, that employer may not submit an application ● As C19 TERS is a temporary relief measure, the benefit is de-linked from the UIF’s normal benefits ● The benefit will only pay for the salary cost of the employees during the temporary closure of the business operations. ● Employees who are being paid in full by their employers during this period, are not eligible for these benefits ● The maximum Unemployment Insurance (UI) benefit will be paid if the employer is unable to pay its employees during the lockdown period ● The employer must inform the UIF immediately on the recommencement of its business operations that were subject to temporary

closure

● The employer must return any unutilized funds,

including interest, to the UIF within 10 days of

the recommencement of its business operations,

or the termination of Memorandum of Agreement Support extended to the concluded by any bargaining council, whichever Industries at risk by is the earlier. Government (continued) ● The salary to be taken into account in calculating the benefits will be capped at a maximum amount of R17,712 per month, per employee and an employee will be paid in terms of the income replacement rate sliding scale ● An employee shall receive a benefit of no less than R3,500. Should an employee's income in terms of the income replacement sliding scale fall below R3,500, the employee will be paid a replacement income equal to that amount

Page 5 of 21 Employment Tax Incentive (ETI) ● An incentive aimed at reducing youth unemployment by encouraging employers to hire young work-seekers ● An immediate cash benefit will be given to the employer ● The amendments of this incentive came into operation on 1 April 2020 and will apply to any remuneration paid on or before 31 July 2020 ● Employees between 30 to 65 years of age as well as employees between 18 to 29 years who were employed before 1 October 2013, will qualify for the ETI ● The gross-up of remuneration for purposes of compliance with the wage regulating measure is not required where the employee is employed and paid remuneration for less than 160 hours per month

Customs Measures:

● Excise: Expedited procedure for temporary

registration to use ethyl alcohol to manufacture

disinfectant ● Export: Export controls on certain products— Support extended to the face masks, hand sanitizers, certain chemical Industries at risk by compounds, and certain medicaments Government (continued) ● Duty relief: Rebate of customs duty and exemption of import VAT on essential goods for which an ITAC permit had been issued

Industry-specific Aid: Tourism ● The Department of Tourism has made an additional R200 million available to assist SMEs in the tourism and hospitality sector who are under particular stress due to the impact of Covid-19

Page 6 of 21 Retail ● The Minister of Trade, Industry and Competition has issued a block exemption (“Block Exemption”) for the Retail Property Sector in respect of a category of agreements or practices between designated retail property tenants and landlords ● The Block Exemption applies only to agreements or practices related to, inter alia, payment holidays and/or rental discounts for tenants ● The Block Exemption extends to all South African designated retail tenants, including small and independent retailers, unless otherwise authorised by the Minister or the Competition Commission.

Tax Relief:

Provisional Tax Relief—Corporates, Trusts, Individuals

● The Disaster Management Tax Relief

Administration Bill has measures to provide for

the deferral of provisional tax by qualifying

taxpayers and qualifying micro businesses ● Criteria for a qualifying taxpayer: Support extended to the ○ A company, trust, partnership, or Industries at risk by individual Government (continued) ○ Taxpayer and tax compliant is contemplated in the Tax Administration Act ○ Has a gross income of R50 million or less during the YA ending on or after 1 April 2020 ○ Gross income for YA does not include more than 10% of income derived from interest, dividends, or foreign dividends ● The first provisional tax payments—due between 1 April 2020 and ending on 30 September 2020—will be reduced to 15% of estimated total tax liability ● The second provisional tax payments—due between 1 April 2020 and 31 March 2021—will be based on 65% of estimated total tax liability ● No penalties or interest will be levied by the South African Revenue Service (SARS) ● The balance would need to be paid in full when making the third provisional tax payment

Page 7 of 21 PAYE Relief for Employers ● A qualifying taxpayer that is a resident employer or representative employer that is registered for employees’ tax by 1 March 2020, may pay 65% of the total employees’ tax due ● This deferral applies to employees’ tax amounts deducted or withheld between 1 April 2020 to 31 July 2020 ● The deferred PAYE liability must be paid to SARS in equal instalments over the six month period beginning on 1 August 2020

Skills Development Levy ● All employers are exempt from liability and payment of the Skills Development Levy for the period 1 May 2020 to 31 August 2020

Carbon Tax Return Filing

● The payment deadline has been extended and is

now due by 31 October 2020

● Provides relief from the filing and payment

requirements for the carbon tax

VAT Relief Support extended to the ● Fast-tracking of VAT refunds, with “smaller VAT Industries at risk by vendors” in a net VAT refund position being Government (continued) allowed temporarily to file monthly VAT returns instead of bi-monthly returns ● Case-by-case application to South African Revenue Service for a waiver of penalties by “larger businesses”—with gross income of more than R100 million—that can show they are incapable of making tax payments due to Covid-19 ○ These businesses must have a gross income of less than R100 million for an additional deferral of payments without incurring penalties

Page 8 of 21 Other: Industrial Development Corporation (“IDC”) Support The IDC and the Department of Trade, Industry and Competition have compiled a more than R3,000,000,000 package for industrial funding to help vulnerable businesses.

Furthermore, the IDC is providing a capital allocation of R3,000,000,000 in the second quarter of 2020 to support businesses during the COVID-19 pandemic.

There are two forms of relief that the IDC has put in place for South African businesses namely the IDC Distressed Funding and the Essential Suppliers Intervention.

IDC Distressed Funding ● The terms of facility state that debt and

guarantees only (equity on a case-by-case

basis) and scheme-related concessionary

pricing

This funding is only available to South African-owned

businesses, and the qualifying criteria includes that:

● It applies to existing IDC clients and new clients Support extended to the in distress as a result of COVID-19 Industries at risk by ● Companies should demonstrate strong business Government (continued) fundamentals and be considered viable ● Relief is only for clients impacted by COVID-19 with a sustainable business plan; ● Intervention plans must show the business case recovering within 18 to 24 months; ● There must be evidence that concessionary finance will enable the business to trade out of any short-to-medium-term financial crisis; ● Risk must be shared with other funders, not just the IDC ● Distressed funding cannot be used to fund bonuses or dividends ● The company’s financial needs must be in excess of assistance from the UIF ● The Compensation Fund, the IDCs funding and any other support schemes, and the IDC’s funding should only be used to fund any shortfall. ● There are also exclusions which include: ○ Normal expansions, refinancing of existing facilities, share buy-backs and ○ Payment of non-operational expenditure for example bonuses.

Page 9 of 21 Essential Suppliers Intervention ● The terms of facilities include... ○ An IDC loan and trade finance facilities: P + 1% per annum ○ MCEP loan facilities: 2.5% per annum ○ Guarantees: 2% per annum. ● The following financial instruments are available: ○ A short-term loan for once-off contract or import funding ○ A revolving credit facility ○ Guarantees to banks for banking facilities, imports and ordering requirements Support extended to the Industries at risk by Conclusion: The South African Government has Government (continued) implemented several relief measures which, at this stage, focus on providing support to SMMEs as well as in providing tax relief, unemployment support, support for black entrepreneurs who manufacture and supply a range of medical products and various loan funding to help support vulnerable South African businesses as a result of the COVID-19 pandemic.

Further relief has been provided by the Partner Banks together with independent private parties and organizations to help assist the country overcome the detrimental effects of COVID-19.

(Botha 2020) (Duffy 2020) (Felthun 2020)

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Elements Details ● The SARB announced measures to ease liquidity conditions: ○ Increasing the number of repo auctions to two to provide intraday liquidity support to clearly banks at the policy rate ○ Reducing the upper and lower limits of the standing facility to lend at repo-rate and borrow at the repo-rate less than 200 bps ○ Raising the size of the main weekly refinancing operations ● The government announced the launch of a unified approach to enable banks to provide debt relief to borrowers Change in Monetary Policy ● The SARB created another program that aims to purchase government securities in the secondary market across the entire yield curve and extend the main refinancing instrument maturities from 3 to 12 months ● The SARB announced temporary relief on the bank capital requirements and reduced the liquidity coverage ratio to 80%±provides additional liquidity and counter financial system risks ● The SARB issued guidance on dividend and cash bonuses distribution to ensure bank capital preservation

(IMF Editors 2020) ● The government is assisting companies and workers facing distress through the Unemployment Insurance Fund (UIF) and special programs from the Industrial Development Corporation ● Additional funds are being made available for the health response to Covid-19: ○ Workers with an income below a certain threshold will receive a small tax subsidy during the next four months Change in Fiscal Policy ○ The most vulnerable families will receive temporarily higher social grant amounts for the next six months ● A new 6-month Covid-19 grant was also created to cover unemployed workers that do not receive grants or UIF benefits and the number of food parcels for distribution was increased ● Funds are available to assist SMEs under stress, mainly in the tourism and hospitality sectors, and small-scale farmers operating in the poultry, livestock, and vegetables sectors.

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● A new loan guarantee scheme will help companies with turnover below a certain threshold to get bank financing for the payment of operating expenses ● Allocations are being made to a solidarity fund to help combat the spread of the virus—with assistance of private contributions—and support municipal provision of emergency water supply, increased sanitation in public transport, and food Change in Fiscal Policy and shelter for the homeless (continued) ● The revenue administration is accelerating reimbursements and tax credits, allowing SMEs to defer certain tax liabilities ● The revenue administration has issued a list of essential goods for a full rebate of customs duty and import VAT exemption ● A 4-month skills development levy tax holiday is also being implemented

(IMF Editors 2020)

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Elements Details Health and Safety Measures: ● The country is sending tens of thousands of community healthcare workers into villages and towns to screen people and refer those with symptoms for testing ● South Africa is erecting field hospitals and expanding its capacity for burials ● The authorities have deployed 24,389 security forces, including the army and police, to enforce regulations prohibiting people from leaving their homes except for essential purposes ● South Africa began the continent’s first trials for the Covid-19 vaccine ● Tobacco and alcohol sales have been banned ● Reinstated the Disaster Management Act and some related regulations

Trade Measures

● South African borders will remain closed except

designated ports of entry for the purposes of

transportation of fuel, cargo, and goods

● Imported goods defined as “essential goods” will

be exempt from VAT ● The DTIC will need to be consulted prior to the Measures taken by the export of certain selected goods including face Government to mitigate Impact masks and hand sanitizers of Covid – 19

Price Gouging ● The DMR specifically authorized the Minister of Trade and Industry to issue directions to “protect consumers from excessive, unfair, unreasonable or unjust pricing of goods and services during the national state of disaster. ● On March 19, 2020, the Minister issued the Consumer and Customer Protection and National Disaster Management Regulations and Directions—mandates that the suppliers of goods “implement reasonable measures to ensure the equitable distribution” such as toilet paper, hand sanitizer, facial masks, surgical gloves, and certain essential goods

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Special Unemployment Insurance Benefit: ● The Ministry of Employment and Labour issued a directive to create a temporary “special benefit under the Unemployment Insurance Fund” for contributors to the fund who have lost income due to the pandemic and the national lockdown ● The directive states that “an employer as a result of the Covid-19 pandemic closes its operations, Measures taken by the or a part of its operations, for a 3 (three) months Government to mitigate Impact or lesser period affected employees shall qualify of Covid – 19 (continued) for a Covid19 benefit.” ● Although employees will be paid in terms of the “income replacement rate sliding scale (38%-60%),” the fund will pay a minimum of ZAR 3,500 (about US $195)

(COVID-19 Temporary Trade Measures 2020) (Goitom 2020) (HRW 2020)

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Industries Impacted Elements Details Essential services include: ● Medical health, and laboratory and medical services ● Disaster management, fire prevention, and emergency services, ● Necessary financial services, insurance services and medical scheme administration ● Grocery stores, including spaza shops ● Wildlife management, anti-poaching and animal care and veterinary services ● Newspaper, broadcasting and telecommunication infrastructure and services ● Postal services and courier services related to transport of medical products ● Call centres necessary to provide health, safety, social support, government and financial services.

Mining:

● Deemed an essential industry, but online are

only allowed to produce at 50% of capacity

● Mineral exploration, processing, and related

supply of goods and services are essential

services Industries Allowed to Operate ● Demand is expected to decline, but the supply fuel and the supply of coal for electricity supply and liquid fuels production are essential

E-commerce: ● Home delivery have increased by 90% ● An e-commerce company in South Africa saw a 500% increase in their business ● South African food retailers have seen a 700% increase in web traffic volumes ● An e-commerce company saw a 15% increase in the size of baskets since the start of the lockdown period

Other: ● Healthcare and pharmaceuticals ● Health and life insurance ● Food production ● Retail groceries and pharmacies ● Law enforcement

(Mulley 2020) (Pombo-van Zyl 2020) (AfricaNews 2020) (Gabriel 2020)

Page 15 of 21 Gold Industry: ● Gold refineries’ capacities have been brought down by 60% ● South Africa’s gold industry’s output has dwindled severely ● Some mines only achieve 30%of their previous output with half their workers ● Covid-19 has resulted in more than 6,000 job losses in this industry

Automotive Industry: ● Exports showed a decline off 8.4% year-on-year in February ● Vehicle sales in March 2020 decreased by over 30% ● The initial three-week lockdown alone cost a local supplier in the automotive during 12% to 15% of annual turnover ● Another local component supplies said that it was expecting to lose 15% of its turnover for Industries Severely Affected the coming three months

Alcohol Industry: ● 80,000 small businesses ranging from farmers to craft brewers may be on the verge of a collapse due to the alcohol ban in South Africa ● As many as 40% of all taverns and smaller businesses will be affected negatively and see a decline in sales

Other: ● Travel, tourism, and hospitality ● Construction ● Sports ● Retail ● Realty ● Aviation ● Manufacturers

(Bloomberg 2020) (Davies 2020) (Reuters 2020)

Page 16 of 21 Others Elements Details Notable Events: Over 1 million meals have been served in the past month as part of the Western Cape Education Department’s (WCED) emergency school feeding programme. The National School Nutrition Programme (NSNP) itself does not usually run during school holidays. The WCED could not ignore the impact of the lockdown on the nutrition of school learners who rely on Miscellaneous the programme.

With additional funding from the Provincial Treasury for emergency feeding, WCED schools began to provide takeaway meals for learners through an emergency programme across the Province.

(Western Cape Education Department 2020)

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