Govt pulls out all the stops to support economy, people

A social relief and economic support package of R500 billion will help get people on their feet and support the economy

Government has announced a massive social relief and economic support package of R500 billion to mitigate the impact of the coronavirus (COVID-19) on South Africans.

In his address to the nation on 21 April, President Ramaphosa said the pandemic required an economic response equal to the scale of the disruption it was causing.

Government's economic response is divided into three phases.

The first phase began in midMarch when the coronavirus pandemic was declared a national disaster.

This phase included a range of measures such as tax relief, the release of disaster relief funds, emergency procurement, wage support through the Unemployment Insurance Fund (UIF) and funding to small businesses.These were aimed at mitigating the worst effects of the pandemic on businesses, communities and individuals.

“We are now embarking on the second phase of our economic response to stabilise the economy, address the extreme decline in supply and demand and protect jobs,” said the President

The social relief and economic support package that stands at the centre of the second phase will cater for an extraordinary health budget to respond to COVID-19, the relief of hunger and social distress, support for companies and workers and the phased reopening of the economy.

“The impact of the coronavirus requires an extraordinary coronavirus budget – of around R500 billion – to direct resources towards fighting the pandemic.This will include the reprioritisation of around R130 billion within the current budget.”

The third phase is the economic strategy implemented to jumpstart the recovery of the economy as the country emerges from the pandemic.

The announcement of the reprioritisation of the state's coffers to fight the pandemic follows recent deliberations at Cabinet, the National Coronavirus Command Council, the President's Coordinating Council, and the National Economic Development and Labour Council, among others.

Raising funds to fight COVID-19

The rest of the funds to fight COVID-19 will be raised from both

local sources, such as the Unemployment Insurance Fund, global partners and international finance institutions.

To date, government has approached the World Bank, International Monetary Fund, BRICS New Development Bank and the African Development Bank. Work is underway between the National Treasury and these institutions on the various funding transactions.

This funding will be used in the first instance, to fund the health response to COVID-19 through the provision of treatment, additional expenditure on personal protective equipment for health workers, community screening, an increase in testing capacity, additional beds in field hospitals, ventilators, medicine and staffing.

“An amount of R20 billion will be directed to addressing our efforts to address the pandemic,” said the President.

Municipalities to receive R20 billion

As the coalface of service delivery, municipalities are among the hardest hit at a time when the demands on them are increasing.

In this regard, additional funding of R20 billion will be made available to municipalities for the provision of emergency water supply, increased sanitisation of public transport and facilities, and providing food and shelter for the homeless.

With the COVID-19 crisis set to add to job losses, the President announced that an additional R100 billion will be set aside for the protection of jobs and to create jobs.

An additional amount of R2 billion will be made available to assist small, medium and micro enterprises and spaza shop owners and other small businesses.

Loan guarantee scheme

In partnership with the major banks, the National Treasury and the South African Reserve Bank, government will introduce a R200 billion loan guarantee scheme.This will assist enterprises with operational costs, such as salaries, rent and the payment of suppliers.

In the initial phase, companies with a turnover of less than R300 million a year will be eligible.

The scheme is tipped to support over 700 000 firms and more than three million employees during this period. A number of banks are ready to roll out the product before the end of the month.

Tax relief measures

In addition to existing tax relief measures, government will also introduce a four-month holiday for companies' skills development levy contributions, fast-tracking

VAT refunds and a three-month delay for filing and first payment of carbon tax.

To assist more businesses, the previous turnover threshold for tax deferrals is being increased to R100 million a year, and the proportion of PAYE payment that can be deferred will be increased to 35 percent.

Businesses with a turnover of more than R100 million a year can apply directly to SARS for deferrals of their tax payments.

“No penalties for late payments will be applicable if they can show they have been materially negatively impacted in this period,” said the President.

Additionally, taxpayers who donate to the Solidarity Fund will be able to claim up to an additional 10 percent as a deduction from their taxable income.

In total these tax measures should provide at least R70 billion in cash flow relief or direct payments to businesses and individuals.

Protection of jobs

Government will set aside an additional R100 billion for the protection of jobs and to create jobs.

“While there are several interventions that already exist within government to deal with the extremely high unemployment, such as the Expanded Public Works Programme and the community works pro

gramme, these are not enough. The coronavirus crisis will lead to many people losing their jobs,” the President said.

Since the declaration of a state of national disaster over a month ago, government has put in place a range of measures to support workers' wages and assist companies in distress.

Help for the vulnerable

The President also announced that government will direct R50 billion towards relieving the plight of South Africans who are most affected by COVID-19 by temporarily increasing the child support grant for six months.

“This means that child support grant beneficiaries will receive an extra R300 in May and from June to October they will receive an additional R500 each month.”

All other grant beneficiaries will receive an extra R250 per month for the next six months.

"Poverty and food insecurity have in recent weeks deepened dramatically as the country deals with the pandemic.To reach the most vulnerable families in the country, we have decided on a temporary six-month coronavirus grant.”

A special Covid-19 Social Relief of Distress grant of R350 a month, for the next six months, will be paid to individuals who are currently unemployed and do not receive any other form of social grant or UIF payment.

The Department of Social Development will issue the requirements needed to access and apply for this funding.

President Ramaphosa acknowledged the government's food distribution capacity is not adequate to meet the demand that has arisen since the start of the epidemic.

“The South African Social Security Agency will, within days, implement a technology-based solution to roll out food assistance at scale through vouchers and cash transfers to ensure that help reaches those who need it faster and more efficiently.”

In addition, the Department of Social Development has partnered with the Solidarity Fund, nongovernmental organisations and community-based organisations to distribute 250 000 food parcels across the country.

Structural reforms

Looking to the future, the President said the time had come to forge a new economy in a new global reality.

The economic strategy going forward will require a new social compact among all role players – business, labour, community and government – to restructure the economy and achieve inclusive growth.

“Building on the cooperation that is being forged among all social partners during this crisis, we will accelerate the structural reforms required to reduce the cost of doing business, to promote localisation and industrialisation, to overhaul state-owned enterprises and to strengthen the informal sector.”

A compact will be forged for radical economic transformation that advances the economic position of women, youth and persons with disabilities, and that makes our cities, towns, villages and rural areas vibrant centres of economic activity.

This new economy must be founded on fairness, empowerment, justice and equality, he added.