Picture: 123RF
Picture: 123RF

SA’s business community has proposed cutting funding to noncritical state-owned enterprises such as airlines SAA and SA Express as well as state oil company PetroSA, as a means to shift resources to the country’s response to coronavirus.

This was one of the options put on the table by the business constituency at a special executive council meeting of the  National Economic Development & Labour Council (Nedlac) on Monday.

“At a fiscal level, we believe that financial support for noncritical SOEs … needs to be redirected to the Covid-19 funding response,” said Stavros Nicolaou, a board member of Business Unity SA.

The National Economic Development and Labour Council met to discuss the impact of the coronavirus along with mitigation measures to avoid the spread of the virus. Business Day TV caught up with Martin Kingston, the vice-president of Business Unity SA, to talk about the decisions made.

On Sunday, President Cyril Ramaphosa declared a national disaster and announced a series of measures, including the closure of schools, travel bans for people from high-risk countries and the prohibition of mass gatherings of more than 100 people, to contain the disease.  

In an attempt to soften the blow to the economy — which has seen trillions shaved off the JSE and deep cuts to SA’s economic growth forecasts — the state is also finalising a package of economic interventions, Ramaphosa said.

At Nedlac, big business also proposed the immediate movement of the R5bn available in the state’s contingency reserve to the health sector, as well as immediate tax and loan relief, particularly for small businesses.

To fund these relief measures, big business proposed that the Covid-19 response be given priority for funding previously intended for noncritical or underperforming programmes. There is, however, no agreement yet on these proposals, Nicolaou told Business Day. “The ball is firmly in government’s court now,” he said.

Entities such as SAA — which is undergoing a fraught business rescue operation — have been a drain on the fiscus. The airline received  R16.4bn to cover the repayment of debt and interest in the most recent budget.

But there was “greater agreement” from the social partners on other measures to mitigate the economic effects of the virus, notably the use of the more than R150bn surplus in the Unemployment Insurance Fund (UIF), to cover any potential shortfall in workers’ wages, Nicolaou said.

Speaking for the government on the outcome of the meeting, trade & industry minister Ebrahim Patel said other economic interventions that received backing included measures by development finance institutions to support companies in distress.

The government also committed to using the recently established Temporary Employee/Employer Relief Scheme, which is administered jointly by the Commission for Conciliation, Mediation and Arbitration (CCMA) and the UIF, to support companies in distress. And there was support for measures by commercial banks and the financial sector to maintain credit and working capital arrangements to help businesses stay afloat, Patel said.

Finance minister Tito Mboweni said at an earlier briefing the state would immediately make funds available through the national disaster relief fund. The state will also make cuts to programmes “throughout the government system” by reducing allocations and shifting funds towards the state’s coronavirus response activities, Mboweni said.

The state has a contingency reserve for unforeseeable events. It makes R5bn available during 2020/2021 with a further R5bn in the two years after that, according to the budget review in February.

Meanwhile, under section 16 of the Public Finance Management Act the finance minister may also authorise the use of funds from the national revenue fund to “defray expenditure that is of an exceptional nature” and cannot wait for a parliamentary appropriation of funds. According to the act, the emergency authorisation may be up to 2% of the total annual national budget for the current financial year.

Citigroup economist Gina Schoeman said that despite the fiscal constraints, the move to declare a national disaster means legislative steps to allocate funds could be made quickly.

Alongside money from the contingency reserve, the measures under the act could allow about R35bn for emergency spending, Schoeman said. This is also an opportunity for government to review its spending and do away with projects that are not a priority. 

“They will probably try to do this budget-neutral because already they are going to face a revenue shortfall from all the growth slippage that is going to happen.”

However, the bottom line is that “no-one, including government, knows the ultimate cost [of the coronavirus] because we don’t know how bad it’s going to spread,” Schoeman said.