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R500 billion COVID-19 stimulus package announced

President Cyril Ramaphosa announced a variety of economic and social support measures, worth R500 billion, to counteract the effects of the coronavirus (COVID-19) pandemic on individuals, businesses and the economy.

Addressing the nation on 21 April, President Ramaphosa said that while the pandemic has resulted in the sudden loss of income for businesses and individuals, deepening poverty and increasing hunger, the urgent and dramatic measures government has taken to delay the spread of the virus were necessary.

“They have given us the space to better respond to the inevitable rise in infections and to thereby save tens of thousands of lives,” he said.

Three-phased economic response

Government’s economic response is divided into three phases.

The first phase began in mid-March, when it declared COVID-19 a national disaster and put in place a broad range of measures to mitigate 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,” the President said.

The R500 billion economic support package includes 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.

To make up the R500 billion, government will reprioritise R130 billion from the current budget. The rest of the funds will be raised from local sources, such as the UIF, and from global partners and international finance institutions.

Of the R500 billion, R20 billion has been allocated to protective equipment for health workers, community screening, an increase in testing capacity, additional beds in field hospitals, ventilators, medicine and staffing; and R20 billion has been allocated to municipalities for the provision of emergency water supply, increased sanitisation of public transport and facilities, and providing food and shelter for the homeless.

Hunger relief

Millions of South Africans in the informal economy and those who are employed are struggling to survive. Poverty and food insecurity have deepened dramatically.

Government has thus introduced a temporary six-month coronavirus grant, worth R50 billion. It includes giving:

  • child support grant beneficiaries an extra R300 in May and, from June to October, an additional R500 each month;
  • other grant beneficiaries an extra R250 per month, for the next six months; and
  • a Covid-19 Social Relief of Distress grant of R350 a month, for the next six months, to unemployed individuals who do not receive any other form of social grant or UIF payment.

The South African Social Security Agency will soon implement a technology-based solution to roll out food assistance through vouchers and cash transfers, and the Department of Social Development has with the Solidarity Fund and non-governmental and community-based organisations to distribute 250 000 food parcels across the country over the next two weeks.

Other measures announced by the President include:

  • An additional R100 billion for the protection of jobs and to create jobs.
  • R40 billion for income support payments for workers whose employers can’t pay their wages.
  • An additional R2 billion to assist SMMEs, spaza shop owners and informal businesses.
  • A R200 billion loan guarantee scheme, in partnership with major banks, National Treasury and the South African Reserve Bank.
  • A four-month holiday for companies’ skills development levy contributions, fast-tracking VAT refunds and a three-month delay for filing and the first payment of carbon tax.
  • Increasing of the previous turnover threshold for tax deferrals to R100 million a year, and increasing the proportion of PAYE payment that can be deferred to 35 percent.
  • 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.

Phased re-opening of the economy

The President confirmed 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.

“… If we end the lockdown too soon or too abruptly, we risk a massive and uncontrollable resurgence of the disease. We will therefore follow a phased approach, guided by the best available scientific evidence, to gradually lift the restrictions on economic activity.

The third phase of the economic response is to drive the recovery of the economy as the country emerges from this pandemic.