Govt to assist businesses, factory workers affected by COVID-19

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Bereng Mpaki

PRIME Minster Thomas Thabane has announced a M500 million fund to support private businesses that have been negatively affected by the coronavirus (COVID-19) pandemic.

The fund is part of a cocktail of measures planned by the government to cushion business and individuals affected by the ongoing national lockdown aimed at preventing the spread of the deadly virus.

Dr Thabane also said Lesotho’s 45 000-strong factory workers would each be given M800 monthly payments by the government over the “next two or three months” to enable them to meet some of their basic needs. That money would be separate from the M500 million earmarked for businesses.

Dr Thabane declared a state of emergency last month and followed this up with a nationwide lockdown from31 March 2020 to 21 April 2020. The state of emergency has since been extended to 28 April 2020.

In terms of the lockdown, a majority of the population is confined to their homes while businesses deemed to be non-essential have suspended operations. Only banks, retailers, funeral parlours, food and medicine manufacturing companies and filling stations are allowed to open.

The rest of businesses including apparel factories which employ 45 000 people, the biggest employing segment after the government, will remain closed for the duration of the lockdown. Since most companies will not be productive, it is unlikely they will be able to pay salaries.

Some companies like Africa’s largest medical cannabis producer, MG Health, have already announced retrenchments citing operational challenges stemming from COVID-19.

In a televised address to the nation this week, Dr Thabane said the government had set aside M500 million for the creation of the COVID-19 Private Sector/Economic Relief Fund to assist private companies affected by the slowdown of businesses due to the pandemic.

“During its 12 April 2020 sitting, the cabinet resolved to establish a COVID-19 Private Sector/Economic Relief Fund, starting with M500 million contributed by the government,” Dr Thabane said, adding, “This fund is in addition to the Disaster Relief Fund which has a budget of M698 million”.

“We all bear witness that the lives of our people and the country’s economy have been negatively affected by the coronavirus pandemic.

“Businesses; both large and small, are losing income as there is no production during this time. Employees are also facing the challenge of losing their jobs and the income they need to feed their families. Landlords, hotel operators and many other businesses are also facing the same challenge.”

Cabinet ministers Tlohelang Aumane (Development Planning) and Moeketsi Majoro (Finance) were present during the televised briefing and elaborated on the premier’s remarks.

Mr Aumane said an announcement would be made in due course to explain how the fund for the companies would be operationalised.

“The government officials are currently working on the procedures (about how) to access the assistance,” Mr Aumane said.

The principal secretary in the Ministry of Finance, Motena Tšolo, said when the fund becomes operational, eligible companies would be given credit guarantees through the Lesotho National Development Corporation (LNDC) and the Ministry of Small Businesses in line with the already existing partial credit guarantee facilities.

“Eligibility is something that will be discussed with them (LNDC and Ministry of Small Businesses),” Ms Tšolo told this publication.

Meanwhile, factory workers will each receive M800 per month for the next two to three months from the government to mitigate the loss of their salaries during and after the lockdown.

“About 45 000 textile workers will be assisted with part of their salaries by the government during this time of emergency,” Dr Thabane said.

Dr Majoro weighed in saying “each worker will be assisted with M800 per month for the next two or three months to enable them to buy food and pay rent”.

Textile companies have already said they will not be able to pay salaries because of lost business during the lockdown. Even after the lockdown, it is likely to take the companies some time to resume normal production due to the disruption of global supply chains as a result of COVID-19.

In addition to the fund for private companies, a leaked policy document recently prepared by the Ministry of Finance proposes other measures to mitigate the impact of the virus.

The payment of pay as you earn (PAYE) taxes and Value Added Tax (VAT) for companies and individuals in the non-essential services will be deferred for the moths of April, May and June 2020.

The Lesotho Revenue Authority (LRA) will defer first quarter and second quarter instalments for large, medium and small taxpayers.

“Tax compliant businesses will receive two forms of relief; namely, a tax related relief measure and an administrative relief measure.

“The tax relief measures being proposed by the LRA are largely underpinned by deferment; payments of specified taxes will be made at the later date through payment plans. Taxes covered under this relief measures are Company Income Tax (CIT), PAYE and VAT. The tax relief measures will allow businesses by easing their cash flow problems during the trying times

“Additional taxes, penalty fees and storage fees accrued as a consequence of unavoidable effects of the lockdown will not be remitted. Clearance of all imported essential goods and goods imported for relief of COVID — 19 will be expedited. To promote social distancing to the extent possible, the LRA will make provisions for remote access service channels which will be used by the LRA clients,” the document states.

Other measures proposed are as follows:

  • The government to provide up to M20 000 matching grants to companies with number of employees ranging from one to 50 on condition the companies retain and do not retrench workers.
  • The Central Bank has reduced the key policy rate (the CBL rate) by 100 bases points from 6, 25 percent to 5, 25 percent per annum and orders commercial banks to implement a similar reduction in their prime lending rates to lighten borrowing costs while also providing relief on interest payments on existing loans.
  • Commercial banks grant three months payment holidays to clients/borrowers whose financial positions will be negatively affected with a condition that the arrangement shall not place the borrower at a worse-off position at the end of the holiday period.
  • Reduction of transaction fees and charges for transacting on electronic platforms (EFT and Internet and Mobile Banking).
  • Deferments of insurance premiums with insurance premium holidays of up to three months without lapsing of policies.  The deferred premiums will be paid later.
  • Insurance companies to continue honouring insurance claims during this time.
  • Mobile network companies to lower fees for certain classes of transactions on their platforms.
  • Support to institutions dealing with gender-based violence to facilitate reporting of cases and ensure follow up.

Ms Tšolo told this publication that the government would extend the begging bowl to development partners for funds to cushion the nation from the impact of COVID-19.

“We are issuing the official request today (yesterday) to all the development partners. We already have about US$ 4,5 million from the World Bank for already existing projects.

“The governor of the Central Bank will be approaching the International Monetary Fund (IMF) on possible balance of payments support under the provisions for COVID-19…. We don’t know what the reaction of the IMF will be,” Ms Tšolo told the Lesotho Times.

It remains to be seen how the IMF will react after it omitted Lesotho from the list of 25 countries selected as beneficiaries of the financial institution’s Catastrophe Containment and Relief Trust (CCRT) aimed at assisting them to mitigate the impact of the pandemic.

“This (CCRT fund) provides grants to our poorest and most vulnerable members to cover their IMF debt obligations for an initial phase over the next six months and will help them channel more of their scarce financial resources towards vital emergency medical and other relief efforts,” IMF managing director Kristalina Georgieva said in a statement on Monday.

“The CCRT can currently provide about US$500 million in grant-based debt service relief… The countries that will receive debt service relief today are: Afghanistan, Benin, Burkina Faso, Central African Republic, Chad, Comoros, Congo, D.R., The Gambia, Guinea, Guinea-Bissau, Haiti, Liberia, Madagascar, Malawi, Mali, Mozambique, Nepal, Niger, Rwanda, São Tomé and Príncipe, Sierra Leone, Solomon Islands, Tajikistan, Togo, and Yemen,” she added.

1 Comment
  1. Mamokete koqo says

    I what to know where people who are living in South Africa mpumalanga can go to apply for food parcels and other essential things during this lockdown who are Lesotho citizens but currently are in SA .

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