Following the state of disaster declared in terms of the Disaster Management Act 57 of 2002 due to the coronavirus pandemic, the Minister of Small Business Development (Minister) established two funds to provide financial relief to small, medium and micro enterprises, namely the Debt Relief Finance Scheme (DRFS) and the Business Growth Resilience Fund (BGRF).
The DRFS fund was designed ‘for businesses which are negatively affected, directly or indirectly due to the coronavirus pandemic. The scheme aims to provide relief on existing debts and repayments to assist SMME’s during the period of the Covid-19 State of Disaster.
The BGRF was designed for businesses who wish to take advantage of supply opportunities resulting from the coronavirus pandemic or shortages in the local market. This fund is targeted at SMME’s that are manufacturing what could be considered essential goods.
The question that arose in respect of these funds is whether a company’s BEE status or factors such as race, gender and disability could be used to determine the recipients of the funding? This issue was recently dealt with by the Pretoria High Court when the Democratic Alliance applied to interdict the Minister from using B-BBEE status, race, gender, ability or disability as criteria for determining which persons or entities will receive funds and to declare the decision to use B-BBEE status, race, gender, ability or disability as a criteria for determining which persons or entities will receive funds as unlawful.
The Minister had previously confirmed that limited preference was given to SMME’s owned by “women, the youth and the disabled” but no clarity was provided as to how these factors were used to make a determination. The opposition argued that this could not be considered a predictable system as there was no explanation as to how these factors were measured or how important these factors were relative to each other or to other factors set out as criteria to be taken into account in the ultimate decision to distribute funds.
The court found that the criteria were vague and thus legally non-compliant and set aside the criteria and referred the matter back to the Minister for a redrafting of the regulations. The Minister would be required to consider the role of race, gender, youth and disability in the formulation of the criteria to be applied in the new document which the Minister is now required to prepare as the guide to the decision to disburse moneys in terms of the two funds.
The Minister has yet to finalise the redrafting of the regulations and so there remains uncertainty as regards to what role race, gender, youth and disability will play or whether BEE status and a BEE certificate will be a factor in determining who receives funding, although it is relatively certain that factors such as race, gender, youth and disability will definitely have a role to play in the decision to award funding.
For now, we will have to await the issuing of the redrafted regulations by the Minister to determine which enterprises will be able to apply and what manner of preference will be afforded to which criteria in applying for funding.