Coronavirus: Ramaphosa ramps up economic relief measures as pandemic grows
President Cyril Ramaphosa is exploring a phased approach to reopening South Africa’s struggling economy and has unveiled a R500bn relief package.
Ramaphosa told the nation late on Tuesday during a televised address that they will know what form a reopening of the country’s economy will take on Thursday,
The social and economic relief package will go hand in hand with accelerated structural reforms, according to Ramaphosa.
That can be viewed as a nod to finance minister Tito Mboweni’s two-phase economic policy response to the COVID-19 crisis, which emphasises the urgent need to institute structural reforms.
The South African president is scheduled to give another live address to the nation on Thursday, when he is expected to inform citizens whether the current lockdown will either be lifted, extended or partially relaxed.
On Wednesday, Ramaphosa will engage virtually with business leaders from around the continent in his capacity as the chair of the African Union about a regional response to the COVID-19 pandemic.
The latest relief package Ramaphosa announced on Tuesday evening includes South Africa’s informal sector, while also ramping up support measures for the formal sector.
“The pandemic requires an economic response that is equal to the scale of the disruption it is causing,” said Ramaphosa.
To date, the World Bank, the International Monetary Fund (IMF), BRICS [Brazil, India, China and South Africa], New Development Bank and the African Development Bank have been approached and are working with the National Treasury on various funding transactions, according to the president.
Safety net for most vulnerable
The spending areas for social relief include:
- R20bn “for additional expenditure on personal protective equipment for health workers, community screening, testing capacity, beds in field hospitals, ventilators, medicine and staffing.”
- R20bn for municipalities to provide emergency water supply, “sanitisation of public transport and facilities, and providing food and shelter for the homeless.”
- R50bn to relieve “the plight of those who are most affected by the coronavirus.”
Furthermore, the department of social development will work with the Solidarity Fund, non-governmental organisations and community-based organisations to distribute 250,000 food parcels across South Africa over the next two weeks.
“The pandemic has resulted in the sudden loss of income for businesses and individuals alike, deepening poverty and increasing hunger,” said Ramaphosa.
Real economy buffers
The World Bank and the IMF expect the region, as well as its major economies, to enter into a recession in 2020 because of the unfolding COVID-19 global pandemic.
Ramaphosa agrees with that assessment and said: “The coronavirus crisis will lead to many people losing their jobs.”
Relief efforts for the real economy include:
- R100bn to protect existing jobs and to create jobs.
- R2bn to assist small business and spaza (informal convenience) shop owners.
- Additional tax measures for big business aimed at freeing up to R70bn.
At the end of Tuesday, the Unemployment Insurance Fund’s special COVID-19 benefit had paid out R1.6bn. This helped more than 37,000 companies and 600,00 workers.
The additional tax measures include the introduction of a four-month holiday for companies’ skills development levy contributions, fast-tracking value-added tax refunds and a three-month delay for filing and first payment of the carbon tax, Ramaphosa said.
Minister Mboweni will provide further details on the economic relief measures and the tax-related announcements.