The Minister of Finance, Tito Mboweni, briefed the media on 24 April, following President Cyril Ramaphosa’s announcement of a R500-billion package of economic measures aimed at addressing challenges facing the economy, hard hit by a recession, Covid-19, and sovereign credit rating downgrades.
The Minister was also joined by National Treasury executives. Mboweni said, “We have developed a set of fiscal and monetary policy interventions. These interventions draw together the skills and expertise of people in the private and public sector.
“We must be careful not to choose a path that seems easy or too good to be true. An easy path, more often than not, leads to a bad destination… Over the past week, the teams from the National Treasury and the South African Reserve Bank have together worked on a set of macro-economic responses to the crisis.”
He added, “Our combined fiscal and monetary policy package is well over R800 billion. This is a major fiscal and monetary policy response.”
The fiscal policy response consists of five main components. These include:
An extraordinary health budget to respond to the virus
The government has set aside R20 billion to be directed at addressing efforts in dealing with the pandemic.
The relief of hunger and social distress
The government will substantially increase social security interventions. “We are directing R50 billion towards relieving the plight of those who are most desperately affected by the virus.”
These are some of the ways the assistance will be provided:
- Child support grant beneficiaries will receive an extra R300 in May. In June, the system will change a bit – from June to October, caregivers will receive an additional R500 each month. All other grants will be topped up by R250 per month for the next six months. The government will use the existing system to disperse these grants. Dr Mampho Modise, the deputy director-general for public finance clarified that in May, the grant will be per beneficiary (namely the child), however, from June to October the R500 will be allocated to the caregiver.
- 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 form of a grant of income. “This is the missing link that needs to be closed in the system.”
Support for companies and workers
Government has also rolled out an extensive set of tax-relief measures and support for workers. Some of these proposals include:
- They have proposed an increase in the expanded employment tax incentive amount from R500 to R750 per employee.
- A skills development levy holiday of four months from 1 May.
- Fast-tracking VAT refunds.
- Deferring the payment of excess duty on alcoholic beverages and tobacco products.
- A three-month deferral for filing and first payment of carbon tax liabilities to 31 October.
- A postponement of some of the corporate tax proposals in this year’s budget on interest expenses and assessed losses.
- An increase in the deferment of employees tax.
- An increase in the turnover threshold for automatic deferrals.
- Solidarity fund has revealed a new way of doing things quicker and more reliably. The Solidarity Fund has spent R1 billion on key protective equipment.
- Expanded access to living annuity funds by allowing individuals to adjust the proportion they receive as annuity income instead of waiting up to one year until their next contract anniversary date.
Phased reopening of the economy
On 25 April, the finance ministry is expected to release the risk-adjusted approach to the economy and how the phased reopening of the economy will work.
“As businesses open, we will focus on screening and testing. Clear communication strategies are required and it is critical to ensure that people feel protected and safe. Targeted lockdowns will need to be re-imposed where risks begin to emerge. It will be critical to facilitate trade, to generate export earnings as well as to provide some support for businesses that can operate. The fiscal and economic impact of banning certain goods needs to be taken into account.”
Supportive monetary banking and financial market measures
“We remain ready and committed to doing whatever it takes to get our country going forward, to support our firms and businesses, to support the old, the infirm, and those without any income so that we can show solidarity among ourselves for the benefit of our people and our society.”
Ministers will further elaborate on how these proposals will affect the relevant departments. Mboweni said, “We are going all out to remove items from the budget which can be postponed. All programmes which can be postponed will be, and we are redirecting money… There are also certain activities which under the normal course of events would have taken place in tourism but it is very clear that for the next while there is not much tourism that’s going to take place, so it doesn’t make sense to keep the budget items.”
He added that the private sector, in conversation with the Treasury and South African Reserve Bank have come to the conclusion that they can unlock between R100 billion and R200 billion through the National Credit Guarantee Scheme. The scheme will favour those who make less than R300 million in turnover.
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