A social relief and economic support package of R500 billion, amounting to around 10% of GDP, will be put in place to respond to the COVID-19 pandemic.
Addressing the nation last night, president Ramaphosa declared that the pandemic requires an economic response that is equal to the scale of the disruption it is causing.
Government was now embarking on the second phase of its economic response to COVID-19, designed to “stabilise the economy, address the extreme decline in supply and demand and protect jobs”.
The third phase, to be outlined in coming days, will focus on the economic strategy to resuscitate the local economy.
“Central to the economic recovery strategy will be the measures we will embark upon to stimulate demand and supply through interventions such as a substantial infrastructure build programme, the speedy implementation of economic reforms, the transformation of our economy and embarking on all other steps that will ignite inclusive economic growth.”
The social relief and economic support package that stands at the centre of the second phase of the economic response consists of:
• an extraordinary health budget to respond to coronavirus;
• the relief of hunger and social distress;
• support for companies and workers; and
• the phased re-opening of the economy.
The R500 billion package will include the reprioritisation of around R130 billion within the current budget.
The remainder of the funds will be sourced from local sources, such as the Unemployment Insurance Fund, and global partners and international finance institutions.
According to the president, the “World Bank, International Monetary Fund, BRICS New Development Bank and the African Development Bank have been approached and are working with the National Treasury on various funding transactions”.
Highlights in the social relief and economic support package include:
• R20 billion to fund the health response to coronavirus including 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.
• R20 billion to municipalities for the provision of emergency water supply, increased sanitisation of public transport and facilities, and providing food and shelter for the homeless.
• A temporary 6-month Coronavirus grant – R50 billion to allow for an extra child support grant of R300 in May and an additional R500 from June to October; an extra R250 per month for the next six months for all grant beneficiaries and a special Covid-19 Social Relief of Distress grant of R350 a month for the next 6 months for individuals currently unemployed and not receiving any other form of social grant or UIF payment.
• An additional R100 billion will be set aside for protection of jobs and to create jobs.
• An additional amount of R2 billion will be made available to assist SMEs and spaza shop owners and other small businesses.
• A R200 billion loan guarantee scheme in partnership with the major banks, the National Treasury and the South African Reserve Bank to assist businesses with operational costs, such as salaries, rent and the payment of suppliers.
• 4-month holiday for companies’ skills development levy contributions, fast-tracking VAT refunds and a 3-month delay for filing and first payment of carbon tax.
• Turnover threshold for tax deferrals increased to R100 million a year, and the proportion of PAYE payment that can be deferred will be increased to 35 percent.
• Taxpayers who donate to the Solidarity Fund can claim up to an additional 10 percent as a deduction from taxable income.
As regards the reopening of the economy, the president confirmed that a phased re-opening of the economy will be implemented.
“We will follow a risk-adjusted approach to the return of economic activity, balancing the continued need to limit the spread of the coronavirus with the need to get people back to work.”
Measures to be taken to re-open the economy beyond the nationwide lockdown will be announced on Thursday.
The finance minister will also table an adjustment budget detailing the social relief and economic support package.
The president indicated that 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”.
Structural reforms to reduce the cost of doing business, promote localisation and industrialisation, overhaul state owned enterprises and strengthen the informal sector will be speeded up.
“Our new economy must be founded on fairness, empowerment, justice and equality.”