- South Africa to Support Economy With $26bn
President Cyril Ramaphosa on Tuesday announced that he would be spending $26 billion or R500 billion to mitigate the negative impact of COVID-19 on South Africa’s economy.
According to the president, part of the money would come from the Unemployment Insurance Fund while the rest would come from multilateral institutions like the World Bank, IMF, etc.
South African economy plunged into recession in the final quarter of 2019 and predicted to contract by 6.1 percent this year due to the negative impact of COVID-19 on the economy after a record weak growth even before the pandemic.
In order to stimulate job creation and enhance businesses, the president is injecting 10 percent of the nation’s GDP into the economy.
Ramaphosa said: “The coronavirus pandemic requires an economic response equal to the scale of the disruption it’s causing. The scale of this emergency relief program is historic. It demonstrates that we will not spare any effort or any expense in our determination to support our people and protect them from harm.”
Experts, however, said the large part of the R500 billion stimulus package announced by the president is from reshuffled expenditures, therefore, the new money is only R170 billion.
According to Boingotlo Gasealahwe, Africa economist, “Despite the ostensibly large stimulus package announced, Treasury hasn’t injected as much new money into the economy. They have reshuffled expenditure and put out a massive loan-guarantee program. What you need is spending, not lending. Only 170 billion rand of the package represents new discretionary spending, making the size of the actual support package announced closer to 3% of GDP.”
Measures introduced to assist the economy include:
- R20 billion to assist efforts that address the pandemic.
- R20 billion for municipalities for the provision of emergency water supply, increased sanitisation of public transport and facilities, and providing food and shelter for the homeless.
- A six-month temporary COVID-19 grant of R50 billion. 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.
- A special Covid-19 Social Relief of Distress grant of R350 a month for the next 6 months will be paid to individuals who are currently unemployed and do not receive any other form of social grant or UIF payment.
- R100 billion for protection of jobs and to create jobs.
- R40 billion for income support payments for workers whose employers are not able to pay their wages.
- R200 billion loan guarantee scheme to be introduced to help businesses pay salaries, rents and suppliers. Companies with a turnover of less than R300 million a year can participate.
