Ramaphosa gets R500bn aid rolling
Cosatu supports looking to IMF for relief
President Cyril Ramaphosa on Tuesday night announced a "historic" R500bn social and economic support package for the country, saying that the funds will be raised both from existing budget resources and international funding institutions, including the International Monetary Fund (IMF).
The package included a special R20bn Covid-19 health budget, wide-ranging support for the most vulnerable through R50bn in expanded social grants, the distribution of food parcels and vouchers and a R200bn loan guarantee scheme for firms that need additional resources to bridge them through the crisis.
Wage support of R60bn to firms and employees through the UIF was put in place two weeks ago and had paid out R1.6bn at the end of Tuesday, assisting over 37,000 companies and 600,000 workers.
Details will be announced in the adjustment budget tabled by the minister of finance.
The size of the package would be 10% of GDP, said Ramaphosa, equal to the damage expected to be done to the economy by the epidemic. SA’s GDP is projected to shrink by between 6% and 10% over 2020, according to projections, based on a five-week lockdown.
By international standards, its scale is impressive and according to the IMF Fiscal Monitor is on a par with Spain, Canada, Korea and Brazil.
It was intended "to demonstrate that we will not spare any effort in our determination to protect our people and we will do whatever it takes to protect them from this crisis," said Ramaphosa. However, he added that the period of expansion would be followed by intensive structural economic reforms and a new social compact to reset SA’s fiscal position.
As of Tuesday, SA’s tally of confirmed cases of Covid-19 stood at 3,465, with 1,055 recorded recoveries and 58 deaths. Ramaphosa warned the public that "we are still in the early stages of the pandemic". An announcement on the phased lifting of the lockdown will be made on Thursday.
About R130bn will be found within the current budget through a reprioritisation of funds. The rest of the funds will be raised from both local sources, such as the UIF, and from global partners and international finance institutions.
"To date, the World Bank, IMF, Brics New Development Bank and the African Development Bank have been approached and are working with the Treasury on various 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 us," he said.
While the ANC and Cosatu have been wary of taking on loans from the IMF, Ramaphosa has provided assurance over the past two days that the fund’s special Covid-19 financing instruments came with limited strings attached.
Cosatu’s general secretary, Bheki Ntshalintshali, said he supported an IMF loan under such circumstances. Based on its reserves at the IMF, SA would be entitled to $4.2bn in loan funding at interest rates of around 1%.
This funding will be used, in the first instance, to fund the health response to coronavirus, which will involve additional expenditure on personal protective equipment for health workers, community screening, an increase in testing capacity, additional beds in field hospitals, ventilators, medicine and staffing.
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.
Ramaphosa said that poverty and food insecurity have deepened dramatically in the course of a few weeks and that government would direct R50bn towards relieving the plight of those who are most desperately affected by the coronavirus.
"This means that child support grant beneficiaries will receive an extra R300 in May and 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 currently unemployed and do not receive any other form of social grant or UIF payment," he said.
The department of social development will issue the requirements needed to access and apply for this funding and the SA 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 that help reaches those who need it faster and more efficiently, he said.
President Cyril Ramaphosa announced that the government will make an additional R500bn available to assist in the fight against Covid-19.
The department of social development and the Solidarity Fund would distribute 250,000 food parcels across the country over the next two weeks.
A R200bn loan guarantee scheme in partnership with the major banks, the National Treasury and the SA Reserve Bank through loans would also be launched, with government providing a backstop to new loans to enable otherwise solvent companies to bridge the lockdown period.
Ramaphosa said he expected that the scheme will support over 700,000 firms and more than 3-million employees and that a number of the banks were ready to roll out the product before the end of the month.
Government is also working on additional support measures for vulnerable and affected sectors like the taxi industry, introducing a four-month holiday for companies’ skills development levy contributions, fast-tracking VAT refunds and a three-month delay for filing and first payment of carbon tax.