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Frustrated ICT SMMEs fail to secure COVID-19 relief funding

Read time 5min 40sec

Some ICT SMMEs have been battling to secure coronavirus (COVID-19) relief funding and financial aid from government, encountering various challenges.

Innovation agency, the Innovation Hub, which incubates over 600 start-ups, and lobby group, Progressive Blacks in ICT (PBICT), which has 3 000 SMME members nationally, told ITWeb that none of their members have been able to secure any of government’s financial relief schemes aimed at assisting businesses which have been negatively impacted by the COVID-19 pandemic.

The founders of tech start-up Thaboera IT Solutions, e-commerce platform Red Puppy, ride-hailing app Emergency Taxi and delivery app Delivery Lady shared their frustrations at not being able to secure financial assistance from the Department of Small Business Development, due to technical glitches, or unsuccessful applications as a result of late submission of documents or non-compliance.

Since the introduction of SA’s strict lockdown regulations on 26 March, most South African businesses have experienced devastating financial losses after halting operations. This has resulted in a blow to the country’s fragile economy, with scores of employees either taking pay cuts or losing their jobs.

In March, the Department of Small Business Development introduced two main funding schemes, aimed at assisting local small businesses: the Debt Relief Finance Scheme, which assists businesses which are negatively affected, directly or indirectly, by the COVID-19 pandemic, and the Business Growth/Resilience Facilityaimed at assisting small businesses which can take advantage of supply opportunities resulting from the coronavirus pandemic or a shortage of goods in the local market.

Qualifying small businesses were required to enrol at www.smmesa.gov.za. The department had said successful applications would receive the funds within seven working days.

In addition, the Unemployment Insurance Fund (UIF) offers the Temporary Employee/Employer Relief Scheme (TERS).

Local payments tech start-up Mama Money was the only business that ITWeb spoke to that said it was able to successfully receive UIF funding for employees who were unable to work in April.

Early indications from SME South Africa’s #CombatCovid SMME Surveyshowan estimated 68% of small businesses that applied for government’s financial assistance had been unsuccessful.

Stringent, unnecessary process

Stephani Lockman, national PBICT chairperson, says out of 50 of its SMMEs that had applied via the online portal, only one was successful for the Debt Relief Finance Scheme. However, the applicant has been waiting for more than two months to receive the funding.

“Only one of our SMMES reported that they received approval of R7 000; however, the funds have not been paid as yet. The process had stringent requirements. This SMME spent R33 600 to obtain six months management reports for a grant of R7 000. It’s ridiculous, to say the least,” notes Lockman.

The majority of applicants received no responses from government, while those that did were told the UIF system crashed and refused uploading of employee documents, she adds.

“As a result, we have sent some of our SMME employees to the employment and labour department, and this week, they were again told the department will only open after the coronavirus period is over – I’m not even sure what this even means.”

Lockman believes the application requirements are too stringent and unnecessary for an SMME. For example, tax compliance, annual financial and management accounts, and financial forecasting statements can be difficult and costly to obtain.

A spokesperson for the Innovation Hub told ITWeb the innovation agency had been assisting some of its 600 start-ups with government funding applications; however, “none of them had received funding due to various reasons provided, including non-compliance”.

Stephani Lockman, national chairperson of the Progressive Blacks in ICT.
Stephani Lockman, national chairperson of the Progressive Blacks in ICT.

Thabo Langalibalele, founder of Thaboera IT Solutions, says he experienced many technical glitches on the application site until he gave up. A screenshot of the Web site error message, which he shared with ITWeb, reads: “Something went wrong, please try submitting the documents later.”

“We tried applying for both UIF and financial assistance, to no avail. We tried several times each week and kept on receiving an error message.

“We then sent e-mails to info@dsbd.gov.za but we’ve had no reply. Our last resort was calling the number provided on the Web site − 0806 663 7869 − and we also had no luck there as the call would go to voicemail,” explains Langalibalele.

He says government simply does not have the capacity to assist distressed SMMEs.

“We had to close shop because we were not able to operate in our line of service during lockdown level four and five. Now that we have moved to level three, our services are operating and we are hoping to gain some of the lost funds.”

Tankiso Motaung, founder of newly-launched online marketplace platform, Red Puppy, says as a new enterprise with three full-time employees to pay salaries to, the business was desperate for financial assistance; however, his application was unsuccessful.

“We found out that we could not apply for UIF employee benefit funds because we were a two-month-old business with no prior record of UIF payment for employees prior to the lockdown. We felt this was discrimination against new businesses because we experienced the same problems as other older businesses and this was setting us up for failure before we took off. We didn’t have any sort of revenue while the e-commerce platforms were partially operating.”

Motaung adds he has since applied for a personal loan to keep Red Puppy afloat.

Prince Pirikisi, founder of taxi-hailing app Emergency Taxi and co-founder of grocery delivery app Delivery Lady, says the feedback he received from government was that his tax documents were submitted late, when he tried to apply for funding.

“Government needs to be more flexible with such things because sometimes it takes a while to collect documents, especially during the first levels of the lockdown when many offices were closed,” notes Pirikisi.

In a statement released last week, the Department of Employment and Labour said its agency, the UIF, has paid out R16.5 billion in TERS funds to almost 300 000 workers and less than 50 000 companies.

The Department of Small Business Development did not respond to e-mails and phone calls from ITWeb.

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