Payment holidays are just one of the many methods South Africa is employing to get by during the nationwide lockdown. The country has been praised for how it is handling the pandemic but experts say the payment holidays are not as simple as they seem.

“I want to highlight that the payment holidays are not without consequence. In these uncertain times, we must understand what economic interventions such as payment holidays entail and how they are going to unfold so that we may be prepared and prevent unnecessary future economic strain in the post-pandemic world,” Hanno Bekker founding director of The Financial and Legal Research Group says.
We know by now that the Covid-19 virus will have a substantial impact on our economy as we see lockdown periods extended, many of us are wondering what our obligations and responsibilities are.
“To make it through this pandemic and to prevent total economic collapse, regular South African consumers must continue to make their payments to businesses. SME’s are the heart of our economy and employ millions of South Africans who still need salaries,” adds Bekker.
Legal obligation to meet your full monthly bank repayment will be suspended between April 1 and June 30, 2020. In spite of this loans will still incur interest and bank charges during this time, that will be billed later.
 
Once the lockdown ends, customers will be expected to pay the interest and fees on their loans that have accumulated over the three months.
Essentially, a payment holiday is a show of good faith from the bank saying that for the next three months they will not act against you for not paying. 
 
As an SME you must meet the following criteria to qualify for a payment holiday: 

– Your business must be based in South Africa

– The annual turnover of your business must be less than 20 million rand

– Your accounts and tax must be paid up to date including payments for March 

– Your business must be in good standing with the bank

– The payment holiday does not include payments on which your business has already fallen behind.

“We strongly recommend to all SME’s who can afford it to avoid making use of the payment holidays. The long-term effect of paying interest on the increased amount after the three-month holiday can have a severe impact on your business’ future cash-flow. If there is no alternative, then you should use it, but be aware of the implications. Businesses can mitigate the economic impact of COVID-19 by taking their business digital wherever possible and maintain contact with their customer base. Rerouting all communication to cell phone lines, video-conferencing and email and transitioning into the e-commerce space can aid in stabilising some of a business’ income and allow entrepreneurs to continue to do business to a certain extent,” Bekker concludes.
In instances where business owners decide that they are not going to pay their employees or suppliers, the Financial and Legal Research Group are available to advise you at no cost and when needed – they can act on your behalf as far as possible as the courts are also directly impacted by the lockdown.
Contact Financial and Legal Research Group at [email protected] – their team will contact you for a free telephonic consultation. 
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