Covid-19 Lockdown Funding Options

In the wake of the Covid-19 Lockdown imposed in South Africa, we wish to offer employers some guidance with regard to the various funding options available to them in these trying times. As such, please find hereunder a summary of the most pertinent points of the UIF and other funding options:

  1. Covid-19 temporary employee / employer relief scheme (C19 TERS):

The basic nature of this endeavour is a separate Unemployment Insurance Fund (UIF) benefit scheme named Covid-19 Temporary Employer-Employee Relief Scheme (Covid-19 TERS) previously referred to as a “National Disaster Benefit”. Once a claim has been made by either an employer or a Bargaining Council, the UIF will release funds to pay employees who have been temporarily laid off because of the Covid-19 crisis.

The directive appears in the Government Gazette (No. 43161) on 26 March 2020, sets the C19 TERS out the basis of the scheme as follows:

“Should an employer as a direct result of Covid-19 pandemic close its operations for a 3 (three) months or lesser period and suffer financial distress, the company shall qualify for a Covid19 Temporary Relief Benefit.”

The Department of Employment and Labour and the Unemployment Insurance Commissioner have encouraged employers to submit a claim on their employees’ behalf. This so as to ensure that the process is completed as timeously as possible and to prevent the UIF from being inundated with individual applications. A claim from the scheme may be made irrespective of how long an employee has been making contributions to the UIF.

The application process an employer is to follow to make a claim is to enter into a memorandum of agreement (MOA) with the UIF in order to make claims on behalf of their employees (NOTE: Employers of less than 10 employees are not required to enter into an MOA). An alternative method is via the relevant Bargaining Council, provided there is a collective agreement to this effect. The necessary details may be obtained by sending a blank email to Covid19ters@labour.gov.za. An automated response will be sent which contains instructions from the UI Commissioner and attaches the relevant forms and other requirements.

The UI Commissioner, Teboho Maruping, has explained that the benefit would be paid on a sliding scale from 38% up to 60% of an individual employee’s salary subject to a maximum salary threshold of R17, 712 per month. Where a company can only pay a percentage of their employees’ salaries and/or wages, the employer may also apply to this fund to top up the remainder of their employees’ salaries.  Practically applied, this results in employees qualifying for a minimum of R3 500 per employee per month and a maximum of R6 730 per employee per month.

It must be noted that TERS is not limited to SMMEs.

  • UIF ‘Reduced Working Time’ Option:

When it was introduced in 2018, the UIF ‘reduced working time’ option was originally intended to benefit employees who had been placed on short-time working arrangements by their employer. It is defined as follows:


“A contributor employed in any sector who loses his or her income due to reduced working time, despite being employed, is entitled to benefits if the contributor’s total income falls below the benefit level that the contributor would have received if he or she had become wholly unemployed, subject to that contributor having enough credits.”

Although not expressly stated, this scheme ought to be available to employees who have been temporarily laid off without pay during the Covid-19 crisis. When making an application for this benefit, an employee must submit the following documents:

  • UI 19 and UI 2.7 (completed by employer)
  • UI 2.1 (application form)
  • UI 2.8 (bank form completed by bank)
  • Letter from employer confirming reduced work time (or lay-off) is due to the Coronavirus
  • Copy of ID document.

Unlike the Covid-19 TERS arrangement, this submission is made by the employee and is subject to the employee’s available credits. As such, it is possible that an employee may be paid less than the minimum wage.  Furthermore, the employee is to obtain a UI-19 form and confirmation of banking details in respect of the account into which the benefit is to be paid. These requirements may pose a challenge during the lock-down.

This benefit is calculated in terms of the income replacement rate sliding scale of 38 % (for high earners) up to 60 % (for low earners) as provided in the Unemployment Insurance Act, subject to the maximum threshold as determined from time to time.

  • South African Future Trust (SAFT):

The South African Future Trust (SAFT), established by Nicky and Jonathan Oppenheimer, will make funds available to South African businesses impacted by the coronavirus from 3 April 2020 through the major banks. The main aim of the SAFT is to mitigate the immediate economic impact of the Covid-19 crisis by keeping companies in business and protecting jobs, in order to fast track South Africa’s economic recovery after this pandemic.

SAFT is earmarked for companies with a turnover of less than R25 million per annum and is an interest-free loan for five years exclusively for the purpose of paying the salaries of permanent employees. The loan has no minimum monthly payments and only needs to be settled at the end of the term. Employees carry no liability for the repayment of the loan.

Qualifying SMMEs will get R750.00 per qualifying employee per week, over a period of 15 weeks, i.e. R11,250.00 per permanent employee. The partner banks are Nedbank, Absa, Standard Bank and FNB.

The Trust is hoping to extend this partnership and has invited other financial institutions to come forward.

The scheme is currently available to clients of the four banks and SMMEs need to apply through their main bank. Once approved, the funds will be paid directly to the nominated employees, however liability for the loan remains with the company which has secured the loan.

  • The Department of Small Business Development:

The Department of Small Business Development has received funding from government to assist SMMEs. All SMMEs should first register with the Department in order to be able to apply for funding. This funding is aimed at companies with a turnover of less than R50 million per annum.

To register go to: www.smmesa.gov.za. Please note this is merely a registration portal and not an application for funding.

At such a critical time in our country’s history, it is important for small business owners to know and understand the recourse available to them – such as those outlined above. While this article is in no way intended to be an in-depth “how-to” guide to the Covid-19 Crisis, we are easily contactable at the email addresses set out hereunder should you require any further information or guidance. 

Gordon Angus:                  gordon@gordonangus.co.za;

Chloe Hoffmann:              chloe@gordonangus.co.za;

Gia Freese:                         gia@gordonangus.co.za

Disclaimer: The information contained in this note is accurate at the time of posting. However, the situation is fluid and constantly updating. Whilst every effort will be made to keep the information up to date and correct, Gordon Angus & Associates (Pty) Ltd cannot be held liable for the actions of the parties using the information provided. Use of this information is therefore at the reader’s own risk.