CAPE TOWN - The R500 billion fiscal stimulus package to help South Africans through the fight against Covid-19 will cushion the impact of deep recession, business failures and rising unemployment that is likely in the country this year.
This was according to well-known economic commentator and North West University Business Professor Raymond Parsons, who was commenting on the stimulus package announced by President Cylril Ramaphosa on Monday night.
The measures were broadly supported by Parson, analysts and businesses, although there remained questions about the state’s ability to deliver on the measures.
For instance, Normal Mbizima, the chairman of Anglo American, speaking on a webinar by the Centre for Development Enterprise yesterday (wed), said the package “was just ace for us”.
Sanlam chief executive Ian Kirk said the fiscal package showed South Africa was on the right track and the opportunity of the crisis should be used to do everything that needed to be done to get the economy on a positive growth trajectory again.
Stanford Mazhindu, a spokesperson for trade union Uasa, said it welcomed the R100bn that wouldl be allocated to protect and create new jobs, while another R40bn would be used for income support for employees whose employers were unable to pay wages.
Also good news was the R300 per month extra for child grant beneficiaries during May and then R500 extra for five months, thereafter.
This as well as the R250 increase for all other grant beneficiaries over the next three months, and the R350 for six months for all unemployed people who were not collecting UIF or another grant, he said.
Johannesburg Stock Exchange chief executive Leila Fourie said the package would create a stronger base on which to grow the economy and drive better ease of business.
“What will be crucial now is the administration and surety that funds will reach intended recipients, and provide relief to our most vulnerable businesses and citizens of our country,” said Fourie.
“The JSE believes measures in the stimulus package will be constructive in enhancing consumer and business confidence through economic and structural mechanisms, including tax reforms, increased grant funding to SME’s and loan facilities raised through a collaboration with major banks,” she said,
The stimulus comes on the back of a country that was in technical recession before it went into lockdown on March 26, compounded by the country’s recent ratings downgrade.
Parsons said the additional spending and borrowing in the fiscal package would see the country’s debt position worsen further.
There would be an even greater need for the state to reprioritise spending away from lesser priorities, such as on dysfunctional state-owned enterprises such as SAA, he said.
It was, nonetheless, welcome that the government was prepared to tap into emergency financial facilities from multilateral institutions like the World Bank and the International
Monetary Fund.
“If SA has to incur more debt it should do so as cheaply as possible,” said Parsons.
“The President rightly emphasized the need to distribute and implement the financial assistance package as rapidly as possible. And every rand counts. Given the country’s poor track record on delivery, there are many issues that lie between committing money and having it effectively delivered in South Africa,” he said.
Intellidex economic analyst Attard Montalto said in a statement, " But there are serious questions...on implementability of complex new systems where even existing ones are not working. As such (the) announcements are full of potential, but also raise serious issues around funding risk and fiscal sustainability.”