Ramaphosa announces raft of ‘quick, targeted’ interventions to buoy SA economy
Mar 23 2020 by Jan Cronje
President Cyril Ramaphosa has announced a raft of “quick and targeted” economic interventions, including a solidarity fund run by the private sector, promises of increased assistance to small and medium-sized enterprises, and tax subsidies of up to R500 a month for some workers earning below R6 500 a month, in an effort to buoy SA’s economy.
This comes as countries around the world scramble to pass economic rescue packages as the impact of the virus severely constrains economic activity, causing stock markets to plunge and layoffs to surge, as analysts warn of a global recession.
Ramaphosa, addressing the nation on Monday evening, announced a nationwide lockdown for 21 days in a bid to slow down the spread of the pandemic. The president said that while the economic impact of the lockdown would be significant, the “costs of not acting now will be far greater”.
Earlier on Monday, the Health Ministry said the number of coronavirus cases in South Africa has jumped by 128 to 402.
Here are the key announcements in what the president called the “first phase” of the state’s economic interventions.
- Ramaphosa said a solidarity fund has been established to help support vulnerable South Africans. The fund, which will complement the state’s work, will accept donations from businesses, individuals and members of the international community. Ramaphosa said the fund will focus on combating the spread of the virus, help track its spread, care for the ill and “support those whose lives are distributed”. “Anyone can begin to deposit funds into the fund from tonight,” he said. The state is providing seed capital of R150 million and the private sector has pledged to support it, he added.
- Ramaphosa said the Rupert and Oppenheimer families had pledged R1 billion each to support small businesses.
- The president said a safety net is being established to help people in the informal sector. Further details will be announced later.
- The president said the state was working on a special dispensation for companies in distress because of the coronavirus. Under this proposal, employees could receive wages via a temporary employee relief scheme to let companies pay employees directly. He did not provide further information.
- Ramaphosa said many large companies have accepted their responsibility to pay affected workers and called on large businesses to take care of their workers.
- The state will consider utilising the reserves of the Unemployment Insurance Fund to extend support to workers in small and medium-sized enterprises and vulnerable firms faced with the loss of income. Details will be made available in the coming days.
- The state will provide a tax subsidy of up to R500 a month for four months for private-sector workers earning less than R6 500 a month. He said this would help up to 4 million workers.
- The president said tax-compliant businesses with a turnover of less than R50 million would be allowed to delay 20% of their PAYE liabilities over the next 4 months, and a portion of their provisional corporate income tax payments over 6 months. This is expected to assist over 75 000 enterprises.
- The state is exploring the temporary reduction of contributions to the UIF and the Skills Development Fund.
- Commercial banks have been exempted from provisions of the Competition Act to enable them to develop common approaches to debt relief and other necessary measures, said Ramaphosa.
- The Industrial Development Corporation has put a package of R3 billion together for industrial funding for vulnerable firms and will seek to fast track financing for companies critical to efforts to fight the virus.
- The Department of Tourism has made R200 million available to assist small and medium-sized enterprises.
- The Department of Small Business Development has made R500 million available immediately to assist small and medium-sized enterprises.
The president added that during the nationwide lockdown, the banking system will remain open, the JSE will continue to function. “The national payment system will continue to operate and the Reserve Bank and the commercial banks will ensure that banknotes and coins remain available,” he said.
“We will prioritise the lives and livelihoods of our people above all else, and will use all of the measures that are within our power to protect them from the economic consequences of this pandemic,” said Ramaphosa.
His package of economic interventions comes as economists predict South Africa’s GDP to plunge in the second quarter of the year as the full impact of the pandemic becomes clear. Dawie Roodt, the chief economist at the Efficient Group, has warned of a 6% contraction of SA’s GDP in the second quarter of the year. Roodt made the prediction before Ramaphosa announces the lockdown.
South Africa’s struggling economy slumped into its second recession in two years in the last quarter of 2019 amid power cuts, low business confidence and record-high unemployment.
Source: Fin24 at https://www.fin24.com/Economy/South-Africa/ramaphosa-announces-raft-of-quick-targeted-interventions-to-buoy-sa-economy-20200323