JOHANNESBURG - The rand weakened more than 1 percent and breached R19 to the dollar for the first time this week as investors anticipated South Africa’s stimulus package amid the coronavirus (Covid-19) pandemic.
The domestic currency is to remain under pressure if the government’s economic recovery plan fails to boost confidence as a plunge in U.S. crude oil futures to below zero sapped risk appetite.
President Cyril Ramaphosa will today finally unveil the government’s economic recovery plan as part of the national response to the coronavirus (Covid-19) pandemic.
In a statement, the Presidency said Ramaphosa would address the nation this evening “on additional economic and social relief measures that form part of the national response to the Covid-19 pandemic”.
This follows extensive deliberations Ramaphosa had with numerous stakeholders to develop this much awaited stimulus package, including his Cabinet, the National Coronavirus Command Council, the President’s Coordinating Council, and the National Economic Development and Labour Council (Nedlac), among others.
The governing party yesterday instructed the government to consider a minimum-income support grant that covers those currently falling outside of social grants, particularly informal and casual workers, small businesses and the unemployed.
The Covid-19, which has infected 3 300 people and killed 58 others, has grind the economy to a halt and shattered the already frail activity, with gross domestic product (GDP) forecast to decline to unprecedented levels.
The government implemented physical distancing measures and allowed only essential services to operate to curb its spread.
This resulted in many companies declaring force majeure and employers applying for relief funds from the Unemployment Insurance Fund on behalf of their laid off workers.
However, the government has agreed to gradual easing of lockdown regulations in various sectors, guided by available evidence which supports the ongoing containment of the virus, until the economy is operating once more on full capacity.
Reports have emerged that Ramaphosa is said to have told an extended meeting of the ruling party’s National Working Committee on Monday that he needed to raise R1-trillion immediately to cushion the impact of Covid-19.
Last week, Intellidex’s Peter Attard Montalto said investors have been increasingly exasperated at the fact that South Africa is bottom of global league tables for stimulus at only around 1.6 percent GDP and is so slow to offer more.
“South Africa needs something of the order of 10 percent GDP or R500 billion to R750 bn. This can only be done off balance sheet,” Attard Montalto said.
“We expect to see an increase in social grant payments by R500/recipient which will cost around R9bn per month announced [this] week.”