Navigating Choppy Waters
Navigating post COVID was always going to be a roller-coaster ride with plenty ups and downs and both relief and stress for many South Africans. The last few weeks have been no exception. We have seen the government announcing a deferral of PAYE tax payments and we have also seen the staggering unemployment numbers surging through South Africa.
At the end of July 2021, President Cyril Ramaphosa announced that the government will defer payment of Pay-As-You-Earn (PAYE) taxes for three months. To be exact, Ramaphosa said there would be a deferral of PAYE taxes for three months, with an automatic deferral of 35% of PAYE liabilities for employers with revenue below R100m.
This announcement will have undoubtedly come as welcome news to businesses, especially small businesses as this should help companies with cash flows. This freed up cash flow would allow businesses to use this excess cash for whatever they feel is necessary to keep their business going, whether it is for operating costs, purchasing stock or assets amongst other costs to the business. These decisions made by the president have been well received as these measures are designed to extend as much assistance as possible to small businesses that need support, without compromising the country's fiscal sustainability.
According to Yolandi Esterhuizen, Sage Africa and Middles East director of product compliance, “The advantage for business is that the SA Revenue Service would not be imposing any penalties or interest on the late payments on this 35%. Furthermore, “It will help companies in terms of their cash flows, obviously to be able to pay their employees and whatever else is necessary to keep them going.”
However, as much as the news of the deferred PAYE has come as a relief for many, the country has also been struck with the hard-hitting reality that the unemployment rate in South Africa has hit an all-time high, something that has been on the horizon for some time now.
An article released by BusinessTech highlighted the stats released by Stats SA. The readings shows that the country’s unemployment rate has risen to another record high, during the second quarter of 2021, currently sitting at 34.2%!
Although the South African government has been caught in the middle of a balancing act ever since the pandemic hit, the decisions made have always been between saving lives or livelihoods, which was always going to be an impossible task. And whilst the spread of COVID seemed to be under control during the first quarter of the year, the threat of a third wave had always been looming.
When the third wave struck, a decision was made to enter more stringent lockdown regulations which further hampered businesses. Even though businesses were not forced to close their doors, economic activity certainly stuttered for a third time and businesses that had only just started to find their feet again were once again left to play catch up.
Along with lockdown restrictions, we also had the looting and rioting that caused havoc in parts of the country. Although the exact impact of the unrest is still being calculated, the current estimate is that it cost the economy R50 billion. While overall, the impact of the rioting and looting probably didn’t play too much of a role in the unemployment figures as these relate to the second quarter, they certainly affected a lot of jobs and could have an impact going into the third quarter.
The unfortunate part is that the unemployment data is likely to deteriorate in the third quarter due to current restrictions in place due to the third wave of infections, hindering efforts to revive an economy that shrank 7% last year. The rising joblessness rate could heap pressure on authorities to extend relief measures that would complicate efforts to stabilize public finances.
As alternate lenders, at Payabill, we continue to work hard to ensure small businesses have the ability to grow and succeed, and as a result, be able to create job opportunities. With the announcement of the deferred PAYE taxes, this will allow cashflow to become better for small businesses and can be enhanced even further by making use of small business funding from Payabill. With our Trade and Finance options, we want to help your business.
With the SME sector amongst the largest sectors in the country’s economy, it is important to keep the sector as healthy and vibrant as possible. A healthy SME sector can be the pathway to increased job opportunities and job creation. The importance can’t be emphasized enough and at Payabill we are determined to push and play our role in turning the economic situation in South Africa around and creating a better way forward for the SME sector.