By Marelise van der Merwe for Fin24
President Cyril Ramaphosa announced an unprecedented R500-billion social and economic support package to mitigate the impact of the coronavirus pandemic on Tuesday evening.
The stimulus package comes to some 10% of the country’s GDP, he said.
Speaking in a televised address to provide an update on a special Cabinet meeting held last week, Ramaphosa said R130 billion of the amount will be supported by reprioritising funds from South Africa’s existing Budget, with Finance Minister Tito Mboweni set to announce the adjustment budget in due course.
The rest would need to be funded externally, the president said, with organisations such as the World Bank, the Brics Bank and the International Monetary Fund having been approached.
The support package includes the following major interventions:
R200 billion loan scheme with major banks
While existing measures have been giving relief to many companies and workers, “it is clear that there is a far greater need across the economy”, Ramaphosa said.
A further R200-billion loan guarantee scheme will be introduced in partnership with major banks, National Treasury and the South African Reserve Bank to help companies with operational costs, salaries, rent and supplier payments, among other things.
A R50-billion boost for grant recipients
A six-month coronavirus grant will be introduced for those “most desperately affected by the coronavirus”. Child support grant beneficiaries will get an extra R300 in May and from June to October, they’ll get another R500 per month. All other grant beneficiaries will get an extra R250 per month for the next six months.
An additional special Social Relief of Distress grant of R350 per month will be available for the next six months to those who are unemployed and not receiving other forms of grants or UIF payments.
R100-billion for jobs
The pandemic has led to many people losing their jobs, the president noted. To date, the Unemployment Insurance Fund’s Covid-19 Benefit has already paid out R1.6 billion, assisting over 37 000 companies and thousands of workers, Ramaphosa said.
However, an additional R100 billion will be set aside to protect and create jobs, he added.
Government will also continue to give assistance in the form of loans, grants and debt restructuring to small businesses, spaza shops and other informal businesses, which have been given R100 million so far, he said.
R70-billion in tax relief
A range of tax relief measures will be introduced to lift pressure on businesses and individuals, the president said. Mboweni is expected to provide further details at a later stage; however, for now we know that a four-month holiday will be granted for companies’skills development levy contributions; VAT refunds will be fast-tracked; and a delay will be granted for the filing and payment of carbon tax.
Businesses will also be given some relief measures, including an increase in the turnover threshold for tax deferrals to R100 million per year, while the proportion of PAYE payments that can be deferred will be increased to 35%. Moreover, no penalties will be applied for late payments if taxpayers can show they were disadvantaged by the coronavirus pandemic.
Lastly, taxpayers who donate to the Solidarity Fund will qualify for a tax break.
R20-billion for municipalities
Municipalities will get a boost in the form of an additional R20 billion in funding for emergency water supply to assist sanitation, as well as public transport, and providing food and shelter for the homeless.
250 000 food parcels
The president expressed concern over food security. “We have recognized that the food distribution capacity of government is not adequate to meet the huge need that has arisen since the start of the epidemic,” he said.
Within the next few days, a tech-based system will be rolled out to provide food – via vouchers and cash – to those who need it most. Furthermore, the Department of Social Development is working with NGOs, the Solidarity Fund and others to distribute 250 000 food parcels across the country in the next two weeks.
Anyone found guilty of corruption in the distribution process would face severe consequences, he warned.
Over R100-million to help protect frontline workers
In the past few weeks, R162 million in financing from the IDC has been approved to support companies for the procurement of personal protective equipment, Ramaphosa said.
Support had been extended to other industries as well, he added.
Calling the overall scale of the relief programme “historic”, Ramaphosa said the government would “spare no expense” to protect South Africa’s people. It was necessary to do “whatever it takes” to recover from the coronavirus crisis, he argued.
The president is scheduled to provide a further update later in the week, detailing government’s planned measures to reopen the economy.