South Africa’s economic plan for Covid-19

President Cyril Ramaphosa has announced various measures that the government is implementing to cushion the already ailing South African economy against the economic shocks of Covid-19.

These measures include tax subsidies for small businesses and individuals, lower contributions to the Unemployment Insurance Fund (UIF), help for households that are in debt, and a relief fund for businesses that may have their operations affected by the virus. 

These new measures were announced by Ramaphosa on Monday night in line with the National Disaster Act to ensure that the country is protected against the “economic consequences of this pandemic”. 

Under the tax system, employees earning R6 500 or less will get a tax subsidy of R500 a month over the next four months. Ramaphosa said that four million South Africans would benefit from this subsidy. 

The South African Revenue Service will also fast-track the payment of employment tax incentive reimbursements from twice a year to monthly to get cash into the hands of compliant employers. Additionally, businesses that are tax compliant and have an annual turnover of less than R50-million will be eligible for a delay of 20% of their pay-as-you-earn liabilities for the next four months. They will also be eligible for a delay in their provisional income tax payments without penalties or interest over the next six months. 

“This intervention is expected to assist over 75 000 small and medium-sized enterprises,” Ramaphosa said. 

The small business department will be providing small businesses with emergency funds and will also launch a debt-relief programme in the wake of the coronavirus outbreak. The intervention programme will comprise a debt-relief fund and business growth and resilience facility to help small businesses mitigate the economic effects of the Covid-19. 

The debt-relief fund will provide assistance to small businesses with funds to cover their existing debts and repayments during the national state of disaster. 

“R500-million is available immediately to assist small and medium enterprises that are in distress through a simplified application process,” Ramaphosa said.  

Solidarity Fund

Ramphosa added that the government will be spending money to save lives and support the economy. He said that the government has contributed R15-million to the new Solidarity Fund. The fund, which will be co-chaired by renowned South African businesspeople Gloria Serobe and Adrian Enthoven, will help to fight Covid-19. 

Businesses, organisations, individuals and members of the international community are able to contribute to the fund.

Ramaphosa has also roped in the help of the billionaire Oppenheimer and Rupert families, who have pledged to assist the government with R1-billion each. This money will go towards assisting small businesses and their employees affected by the Covid-19 pandemic.

Other measures include setting up a temporary employee relief scheme, which will help companies that are in distress to pay their workers and avoid retrenchments during the lockdown. Ramaphosa has also urged  big companies with financial means to support their workers. 

The Industrial Development Corporation and the department of trade, industry and competition have put a package together of more than R3-billion in industrial funding. This funding will specifically address the situation of vulnerable firms and fast-track financing for companies critical to our efforts to fight the virus and its economic effects.

Those employees who will be working and might fall ill through exposure at their workplace, will be paid through the Compensation Fund.

Ramaphosa added that 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.

Standard Bank and Nedbank have already announced help on payments of student loans and help for businesses and households who are in debt.

The president has also said that the South Arican Reserve Bank’s interest rate cut of 100 basis points last Thursday will provide much-needed relief to consumers and businesses.  

He added that the governor of the central bank, Lesetja Kganyago, has assured him that banks are willing to do whatever it takes to help business and consumers. 

More details of the economic measures taken by the government during the 21-day, countrywide lockdown are expected in the coming days. A media briefing will be held on Tuesday morning, when various ministers will provide more detail about how their departments will implement the government’s plans: follow the Mail & Guardian for more details and analysis.  

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