May 2020 2nd Edition

Government’s response to COVID-19

Finance Minister Tito Mboweni recently briefed the nation on government’s coordinated economic and financial response to the coronavirus (COVID-19), confirming that National Treasury and the South African Reserve Bank worked together on a set of responses to the crisis. 

There are five main components to government’s economic response, namely;

  • an extraordinary health budget (R20 billion); 
  • relief of hunger and social distress; 
  • support for companies and workers; 
  • the phased re-opening of the economy;
  • supportive monetary and financial market measures.

President Cyril Ramaphosa spoke in detail of these measures when he recently announced government’s R500 billion COVID-19 stimulus package.

Three-phase COVID-19 response

In the month ahead, government’s response will consist of three phases. Phase one, the current phase, aims to preserve the economy. 

Phase two is a plan for recovery, while Phase Three will position the economy for structurally higher growth.

“As we come out of the coronavirus crisis, we must work quickly to implement our structural reforms to get the economy moving. Virus or no virus, the economy has been growing too slowly for too long,” the minister said.

Favouring unemployed South Africans

Minister Mboweni said that businesses hoping to open and thrive post the lockdown should consider amending their labour market policies to favour unemployed South Africans, including restaurants.

He explained that when he returned to South Africa from exile in 1990, eight out of 10 restaurant workers were South African. “The other two were probably Malawian or Zimbabwean. Today, almost 100 percent are non-South African. The new economy that we are getting into after the lifting of the lockdown must answer that question,” Minister Mboweni said.

“Any establishment wanting to reopen must have a new labour market policy which prioritises South Africans, but does not discriminate against [foreigners]. But, the proportion of South Africans working in a restaurant must be greater than that of non-South Africans. This is a new economy we are talking about,” he added.

Spaza shops must be registered

Speaking about COVID-19 relief for spaza shops, Minister Mboweni reiterated that every spaza shop must be registered, have a licence to operate, have a bank account and have a tax number.

“They must also open their business for inspection by the Department of Health, so that our people are not being fed expired goods,” said Minister Mboweni.

The Department of Small Business Development has finalised an agreement with Nedbank to support spaza shops and general dealers, on the back of the Small Enterprise Finance Agency’s Khula Credit Guarantee Scheme. Nedbank has since put additional service points in place at Boxer stores countrywide.

The support scheme also benefits general dealers and traditional grocery stores, that have applicable licences and are 100 percent owned by South Africans, in townships and villages. Local hardware stores are also beneficiaries under this scheme.   

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