If unemployment fund is used for coronavirus, bail out people, not business - economist

3D art based in microscope images of the corona virus from the 2020 outbreak in Wuhan, China
3D art based in microscope images of the corona virus from the 2020 outbreak in Wuhan, China

While the roughly R180 billion Unemployment Insurance Fund savings could be a useful mechanism to assist during the coronavirus outbreak, it should be used to help people, not businesses.

This is according to economist Mike Schussler, who on Tuesday responded to news that the Congress of South African Trade Unions and Business Unity South Africa had asked government during a meeting on Monday to use the UIF's assets to finance temporary layoffs and support companies hit by the pandemic.

According to a Bloomberg report, the labour federation and business lobby group also suggested government direct money towards critical state-owned entities, such as power utility Eskom, rather than those who do not perform essential functions, such as South African Airways.

People, not business

The UIF exists to provide social security to workers should they lose their employment, serving as a buffer to the blow of becoming jobless.

Schussler told Fin24 that the UIF has a mandate to assist South African workers when they are unable to work and that these funds should not be used to bail out businesses that have fallen on hard times, especially if their challenges have little to do with the coronavirus.

"I agree that we should use UIF to assist in this time, but I differ with Cosatu greatly on who the assistance should go to.

"We should pay the sick part of their salary. If people lose their jobs, let's pay them 50% of their salary for 14 months, which can give them stability," said Schussler.

Use the money as intended

Schussler said he was wary of the suggestion that the UIF be given the task of determining which businesses to invest in, as investing in business was not in the UIF's mandate.

"All we need to do is use that money for what it was meant for. We can have a category of Covid-19 payments for a few months where employees are not at work, without losing benefits, they can be paid by the UIF," Schussler said.

Schussler said businesses already had ample measures at their disposal to help soften the blow of the coronavirus, and that government’s attention should be on protecting the most vulnerable, which are workers that may be affected if they contract it.

He said UIF's assistance to business should be limited to financially supporting temporary replacements for sick employees.

'Cosatu should protect workers'

"I am worried that Cosatu, which should be protecting workers, is asking government to protect companies, when employees are still vulnerable.

"Lower interest rates - or banks can help, if you want to save businesses, but don't give them savings which were meant for ordinary people," he said.

On Sunday, President Cyril Ramaphosa announced a series of measures to curb the spread of the coronavirus, and to assist businesses that will inevitably struggle as the pandemic continues. These include the closure of ports, as well as financial assistance measures.

"Because of the severity of this virus and its rapid spreading, government will make funding available to capacitate the sectors dealing with the national response to the coronavirus outbreak," said Ramaphosa.

South Africa has 62 confirmed cases of coronavirus, according to updates from government on Tuesday morning.

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