Debt Relief Fund a mere drop in the ocean

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As tens of thousands of small businesses around the country struggle to keep running, the department of small business development (DSBD) has depleted its entire R500-million Covid-19 Debt Relief Fund on providing assistance to less than 1 500 businesses, leaving about 33 000 other applicants without funding.

And almost a week after it promised to publish a list of all the companies that had been granted finance through the scheme, no such list has been made public.

The Debt Relief Fund was among the raft of measures set up by the government to help businesses mitigate the economic carnage caused by Covid-19 and the lockdown. The intention was to provide loans to assist small companies with their payroll, rental and utilities payments.

The DSBD received 35 865 applications from struggling companies. Of those applications, more than 21 000 were rejected as “incomplete”. Of the roughly 14 500 applications deemed acceptable, nearly 13 000 were also rejected. 

“Sefa (Small Enterprise Finance Agency) has approved 1 497 applications worth R513-million,” the department said in a recent statement. This means that each of the successful applicants was awarded an average of R342 000, while the remaining approximately 33 000 applicants were turned away empty-handed.

The official “rejection email” from Sefa encourages applicants to apply at the Unemployment Insurance Fund (UIF) instead. The department has indicated that this is where the bulk of the needs lie — the Debt Relief Fund applicants’ combined need for salary payments totals R3.6-billion, it says.

The DSBD has formed an agreement with the UIF to ensure that small businesses that previously did not qualify due to non-compliance can still be covered by the UIF, provided they agree to an acknowledgement of debt and stipulated repayment terms. Through this scheme, applicants can cover between 38% and 60% of their employees’ salaries.

But many businesses desperately need assistance with their operational costs in order to stay afloat. “Applying to UIF doesn’t talk to the needs behind our application,” says Quentin Mabuza, the owner of a party and games venue that ran successfully for eight years prior to the pandemic.

“We needed assistance not only with salaries but also with rental, and to honour obligations to suppliers, to help us sustain our business during this time. The staff costs were only one small aspect of it.”

For companies such as Mabuza’s, that funding would have helped to keep its doors open.

Where are all the pennies gone?  

In its public statement, the DSBD said that it would publish the names of all of the businesses that had received funding on its websites from May 29. The Mail & Guardian has made repeated requests for the list, as well as for comment or clarification from the department. In each case, it has received no response. 

The DSBD outlines that a company must be 100% South African owned and should employ at least 70% South African citizens in order to qualify for funding. It also said it would publish a demographic breakdown of the money that is being awarded, including “rand values per demographic spread”. This begs the question around whether race is being used as a qualifying determinant for funding, similar to the hotly-contested broad-based black economic empowerment (B-BBEE) weighted funding being offered by the department of tourism.

Many black-owned businesses have been turned away. Mabuza’s company is 100% black owned, and all of its staff members are black. The M&G appealed to a Facebook group of 30 000 black entrepreneurs, and not a single member came forward to say they had received assistance.

“We are listening to small businesses in South Africa,” says Mike Anderson, chief executive of the National Small Business Chamber. “And small businesses are saying: ‘why aren’t we getting funding?’”

Anderson says that the government should provide “a specific success guide in step-by-step form of what to do, and what not to do. I think what small businesses need is clear direction on exactly what they need to do to get the funding”.

The department says it will “continue to engage with national treasury on this funding gap that is still required to fund those who have already applied”. Anderson says that this process needs to be finalised urgently.

“A lot more money is needed to really solve the problem,” he says. “I just wonder if the government realises how crucial this is. I don’t think there’s a lot of thought going into the devastation that this is causing.

“About two-thirds of South Africans work for small businesses. A survey conducted among our members found that 90% of them are in crisis,” he says. “The majority of small businesses operate from month to month. They’re applying for funding, and they need it now.”

In the meantime, knowing that it will still be months before their party venue can open up to the public, Mabuza says his company has no choice but to shut its doors permanently.

“We’ve already had those difficult conversations,” he says. “We are looking around for a buyer. If don’t find a buyer, we will just go quietly into the night.” 

*Not his real name

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