Mboweni outlines Ramaphosa’s R27 billion Covid-19 relief package

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Finance Minister Tito Mboweni.
Finance Minister Tito Mboweni.
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BUSINESS


The R350 Social Relief of Distress grant announced by President Cyril Ramaphosa on Sunday will cost the fiscus about R27 billion, according to Finance Minister Tito Mboweni, who on Wednesday held a press briefing to provide some details about the measures announced by the president to support the recovery of the economy and provide relief for the poor.

Mboweni said a temporary reintroduction of the grant will happen immediately and will include support for child caregivers on an application basis:

We want to make it clear that this is not a permanent social protection solution. Much work is still being done in this area, and additional borrowings to fund a consumption grant are not supported.
Mboweni

On Sunday, Ramaphosa announced a range of measures to support the recovery of the economy and provide relief to the poor and those who are vulnerable as a result of the lockdowns that have been imposed to deal with Covid-19.

READ: Ramaphosa’s R350 grant not enough – economic justice group

The announcement came after riots earlier this month across KwaZulu-Natal and Gauteng. The violence led to loss of more than 300 lives, destruction of more than 50 000 businesses and attacks on vital infrastructure in the two provinces. The unrest was made worse by a vicious third wave of Covid-19 infections.

These events have had a serious effect on South Africans and the economy. The implementation of both level 3 and level 4 lockdowns will also have a negative impact on economic output.

In the short-term, because of the lockdowns, experts say South Africa should expect to see weaker consumer sentiment, business confidence and demand for certain products filtering through into weaker manufacturing production and wholesale trade sales.

READ: Pressure on Cyril’s response to economic troubles

According to Stats SA, high frequency data in the current lockdown shows that retail sales and transport activity were the most negatively affected by the restrictions imposed during the third wave, while most other economic activity continued to recover.

Because of this, Treasury still projects that the South African economy will only return to pre-Covid-19 levels of the fourth quarter 2019 in 2023, reflecting the significant and negative impacts of the pandemic and associated lockdowns on the economy.

Mboweni said South Africa’s fiscal situation remains serious, adding that the country’s macro-fiscal context will remain constrained as a consequence of the unrest and the continued lockdown.

Fiscal adventurism is not the solution to South Africa’s problems. It is against this backdrop [that] a package of measures is proposed which will be carefully financed to avoid further damage to the public finances.
Mboweni

It should also be underpinned by greater urgency in the implementation of “growth-enhancing reforms”.

Mboweni said the current estimated cost of damage to property and equipment in eThekwini alone is R15 billion as there was widespread damage to shops and malls, network towers, post offices, factories, roads and freight trains.

“Hundreds of ATMs have been destroyed, making access to cash harder,” he added.

Ramaphosa said the reintroduction of the R350 grant was made possible by the slight improvement in the country’s revenue collection.

READ: Inflation eases to 4.9% in June, slightly above the Reserve Bank midway point

He added that the number of people who are eligible for the grant will be expanded, adding that government would also allow unemployed caregivers who currently receive a child support grant to apply.

The president also announced food relief packages, saying government would contribute R400 million to the Humanitarian Crisis Relief Fund established by the Solidarity Fund.

The president added that government was also implementing measures to help businesses to rebuild after the riots.

In Wednesday’s media briefing, Mboweni said the financial backing of Sasria, a state-owned non-life insurer that provides special risk cover to all individuals and businesses that own assets in South Africa, is currently at R3.9 billion, pending a regular assessment of the insurance payouts.

“This amount is a provision for a required capital injection should Sasria exceed its limits. It may be revised as events unfold,” said Mboweni.

He added that the support for small businesses that are not covered by Sasria will amount to R2.3 billion.

READ: Scores of informal traders have no insurance to fall back on

Mboweni said these figures are composed of reprioritisation of R1 billion and additions of R1.3 billion to the five baselines of the department of trade, industry and competition, and the department of small business development.

“These two departments will work out the modalities for assessing applications and getting the money to the correct recipients,” he said.

In addition to the above, the Unemployment Insurance Fund [UIF] has also set aside R5.3 billion for the extension of the Covid-19 Temporary Employee Relief Scheme coverage.
Mboweni

“This will mainly cover those who have lost their jobs due to the lockdowns,” said the minister.

Regarding the people who lost their jobs due to the recent unrest, the UIF will provide income support using the different instruments that it has at its disposal to deal with such eventualities.

“Details in this regard will be given by the minister of employment and labour [Thulas Nxesi].”

Mboweni said the relief package is underpinned by the acceleration of the vaccination roll-out programme.

In February, Treasury said that the cost of the vaccination programme would be about R19.3 billion.

“We have committed to make whatever resources are required available to ensure its success – R4.3 billion was already allocated to the department of health.

“We are now augmenting this allocation by making an additional R5.3 billion available to the department of health from the contingency reserve for more vaccine purchases and logistical arrangements,” said Mboweni.

Annexure of the cost breakdown as provided by the National Treasury

Annexure of the cost breakdown as provided by the National Treasury


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