Coronavirus: Unprecedented R500bn social, economic relief plan to counter 'devastating' effect on economy

2020-04-22 06:37

In what is surely the government's most ambitious social spending effort in the democratic era, potentially reaching the pockets of millions of impoverished and vulnerable South Africans, President Cyril Ramaphosa outlined a massive R500 billion social and economic spending plan on Tuesday to buffer some of the effects of the coronavirus on South Africa. 

This as the country faces the prospect of increased hunger riots, a million job losses, and the dire entrenchment of poverty in a society already burdened with high levels of poverty and unemployment.

As of Tuesday night, the number of confirmed Covid-19 cases in South Africa was 3 465, the health department said.

In a televised address on Tuesday night, Ramaphosa said the R500 billion plan, which translates to roughly 10% of GDP, encompasses an "extraordinary" health budget, the relief of hunger and social distress in the form of grants; support for companies and workers, especially spaza shop owners and small businesses; and tax relief for distressed firms.

It will be funded in part by international finance institutions and by redirecting funds already allocated in the current budget. 

The main interventions announced on Tuesday are: 

  • R20 billion directly for fighting the pandemic. This includes spending on protective equipment for healthcare workers, additional ventilators, staffing, medicine, field hospitals and community screening.
  • R20 billion for municipalities for the provision of emergency water supplies, sanitising public transport facilities as well as feeding and housing the homeless.
  • R50 billion towards new grants, grant top-ups and other measures to relieve social distress.
  • R100 billion for the protection of jobs and job creation.
  • R40 billion for income support payments for workers whose employers cannot pay wages.
  • R2 billion to assist spaza shop owners and small businesses.
  • A R200 billion loan guarantee scheme from the banks, National Treasury and SA Reserve Bank.
  • R70 billion in tax relief schemes for distressed businesses.

In addition, taxpayers who donate to the Solidarity Fund will be able to claim 10% as a percentage of their taxable income.

'Devastating' impact on economy

Ramaphosa said the government's "urgent and dramatic steps" taken to stop Covid-19 have saved tens of thousands of lives, and were "absolutely necessary".

But, he added, this was having a devastating effect on the economy.

There are fears this will be enough to tip economically vulnerable households below the poverty line.

Some estimates have put the total damage to the economy as a result of the Covid-19 lockdown at a downturn of between 6 to 8%, with a million job losses.

READ | Unemployed will get R2 100 each in Covid-19 payouts over 6 months, children R2 800 extra

A 2018 study found only a quarter of South Africans can be considered middle class or of the elite class, while the rest either live in poverty or close to it. The same study found three out of four children under the age of 15 live in poverty.

Protests over food shortages have already been seen across the country, and the SA Social Security Agency is currently overwhelmed with applications for food parcels, receiving 9 000 calls an hour.

Grants and relief for impoverished

Civil society has been vocal in its call for greater relief, especially for the unemployed and informally employed.

So perhaps the most significant measure introduced by Ramaphosa was the use of the existing social security infrastructure to distribute millions of rand to the poorest in society via grants.

A number of institutions, academics, activists and economists had called for some form of a grant, either in the form of a new grant, a top-up of the child support grant or all grants, or the distribution of cash to the poorest in society.

Ramaphosa appears to have adopted all of these suggestions which include:

  • A six-month temporary coronavirus grant.
  • An increase of the child support grant of R300 in May and R500 from June to October.
  • An extra R250 for other grant beneficiaries for the next six months.
  • A Covid-19 social relief of distress grant of R350 per month for six months for unemployed people who do not receive any other grant or Unemployment Insurance Fund payment.
  • The roll-out of vouchers and cash transfers to those in need for food assistance.
  • The distribution of 250 000 food parcels in the next two weeks (a partnership between the Solidarity Fund, NGOs, community-based organisations and the Department of Social Development). 

Funding

The R500 billion plan will be financed by R130 billion that will be reprioritised from the current budget. The rest of the money will come from international finance institutions like the World Bank, International Monetary Fund, BRICS New Development Bank and African Development Bank, all of which have been approached for funding, Ramaphosa said.

This will be seen as a direct snub to the ANC, which previously rejected any mention of approaching international lending institutions.

Tuesday's announcement followed a Cabinet meeting on Monday, where ministers made presentations on possible social and economic relief packages. The ANC had also called for some kind of stimulus plan and basic income grant.

Rapid spread

Meanwhile, Health Minister Zweli Mkhize has deployed top medical experts, led by a specialist pathologist from the National Institute for Infectious Diseases, Dr Kerrigan McCarthy, to help the Eastern Cape government address a rapid increase in Covid-19 cases in the province.

Mkhize said cultural practices occurring at funerals were increasing the spread in the Eastern Cape. The province has the third highest number of infections, now at 345.

Mkhize said officials have engaged with the Eastern Cape government and decided to urgently deploy the team of specialists, which includes field workers, epidemiologists and experts from the World Health Organisation.

'Lift the lockdown'

On Monday, 19 doctors called on Ramaphosa to end the hard lockdown, arguing there would be more damage to the country's health system if it continues.

Dr Saiendhra Moodley, a public health specialist at the University of Pretoria, told News24 it was premature to judge whether the lockdown had worked.

"If nothing was done, we'd be looking at tens of thousands of cases already. Preventing that versus the negative effects of the lockdown… It's difficult to make that comparison when you don't know the number of cases you've actually prevented.

"My view is that the lockdown has had a positive impact - it has prevented the widespread spread of the disease in terms of local transmission to improve capacity in the health services. So the question is how much longer one can continue in the state of hard lockdown, but I think it was the right decision," he said.

Further plans regarding the phasing out of the lockdown would be announced on Thursday, Ramaphosa said.

Read more on:    cyril ramaphosa  |  lockdown  |  coronavirus
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