Ramaphosa's mega budget for Covid-19 response
In his address to the nation, Ramaphosa said: “As part of this phase, we are announcing this evening a massive social relief and economic support package of R500bn, which amounts to around 10% of GDP.
“The third phase is the economic strategy we will implement to drive the recovery of our economy as the country emerges from this pandemic.”
Ramaphosa said central to the economic recovery strategy would be the measures to stimulate demand and supply through interventions such as a substantial infrastructure build programme, the speedy implementation of economic reforms, the transformation of the economy and embarking on all other steps that will ignite inclusive economic growth.
“We will outline this in coming days,” he said. “We have met with business, labour and the community constituency in Nedlac. We have met with premiers, MECs and mayors and with the members of the Presidential Economic Advisory Council.
“Following these meetings, Cabinet considered various proposals and finalised the social relief and economic support package that stands at the centre of the second phase of our economic response.
“Firstly, an extraordinary health budget to respond to coronavirus. Secondly, the relief of hunger and social distress. Thirdly, support for companies and workers, and fourthly, the phased re-opening of the economy.”
In this regard, he said the impact of the coronavirus requires an extraordinary coronavirus budget - of around R500bn - to direct resources towards fighting the pandemic.
This will include the reprioritisation of around R130bn within the current Budget.
The rest of the funds will be raised from both local sources, such as the Unemployment Insurance Fund, and from global partners and international finance institutions.
To date, the World Bank, International Monetary Fund, BRICS New Development Bank and the African Development Bank have been approached and are working with the National Treasury on funding transactions.
Some of these institutions have created financing packages that are aimed at assisting countries that are having to address the coronavirus crisis like SA.
This funding will be used, in the first instance, to fund the health response to coronavirus. An amount of R20bn will be directed to addressing our efforts to address the pandemic.
Additional funding of R20bn will be made available to municipalities for the provision of emergency water supply, increased sanitisation of public transport and facilities, and providing food and shelter for the homeless.
Another significant area that requires massive additional expenditure is the relief of hunger and social distress in communities. “To reach the most vulnerable families in the country, we have decided on a temporary 6-month coronavirus grant,” Ramaphosa said.
“We will direct R50bn towards relieving the plight of those who are most desperately affected. This means child support grant beneficiaries will receive an extra R300 in May. From June to October they will receive an additional R500 each month. All other grant beneficiaries will receive an extra R250 per month for the next six months.”
In addition, a special Covid-19 Social Relief of Distress grant of R350 a month for the next six months will be paid to individuals who are unemployed and do not receive any other form of social grant or UIF payment.
The Department of Social Development will issue the requirements needed to access and apply for this funding.
“We have recognised that the food distribution capacity of government is not adequate to meet the huge need that has arisen since the start of the epidemic. The South African Social Security Agency will within days implement a technology-based solution to roll out food assistance at scale through vouchers and cash transfers to ensure help reaches those who need it faster and more efficiently.”
In addition, to fill the immediate need, the Department of Social Development has partnered with the Solidarity Fund, NGOs and community-based organisations to distribute 250000 food parcels across the country over the next two weeks.
Ramaphosa added: “The coronavirus crisis will lead to many people losing their jobs. An additional R100bn will be set aside for protection of jobs and to create jobs; R40 billion has been set aside for income support payments for workers whose employers are not able to pay their wages. We continue to provide assistance - in the form of loans, grants and debt restructuring - to SMMEs, spaza shop owners and other informal businesses. The value of this assistance to date is over R100million.”
An additional amount of R2bn will be made available to assist SMEs, spaza shop owners and other small businesses.
While these measures are providing obvious relief to many companies and workers, it was clear there was a far greater need across the entire economy.
“We will therefore be introducing a R200bn loan guarantee scheme in partnership with the major banks, the National Treasury and the South African Reserve Bank,” he said.
“This crisis will not last forever; the day will come when these measures are no longer needed. Until then, however, we must ensure that all of our people receive adequate support.”.
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** If you think you have been exposed to the Covid-19 virus, please call the 24-hour hotline on 0800 029 999 or visit sacoronavirus.co.za