Government forks out R36bn to fund Covid and unrest relief measures
‘We have to do something. We can’t sit back, cry and be sad about it,’ says finance minister Tito Mboweni
Government has announced a R36.2bn package to support SA’s economic recovery and provide relief to the poor.
This follows President Cyril Ramaphosa’s announcement on Sunday that government would throw its weight behind the economy, which has been battered by Covid-19 and recent civil unrest.
The National Treasury on Wednesday revealed that:
- R2.3bn has been set aside to help small businesses recover;
- R700m has been allocated to the SA National Defence Force (SANDF) for soldiers;
- R350m will go towards police deployed to keep peace after the unrest;
- R27bn will be used to fund the reinstatement of the R350 social relief of distress grant until March 2022; and
- State-owned insurance company SA Special Risks Insurance Association (Sasria) will get R3.9bn.
Finance minister Tito Mboweni said this month’s unrest in KwaZulu-Natal and Gauteng — and other parts of the country, but on a smaller scale — had a huge impact on the economy and negatively affected the projected economic recovery trajectory.
“The National Treasury now projects we will only be able to go back to the pre-Covid-19 growth situation in about 2023,” said Mboweni.
The current estimated cost of damage to property and infrastructure in eThekwini alone was about R15bn, he said.
“This R15bn normally would have been used for better economic performance, but this destruction in eThekwini is very significant,” he said.
It extended to shops, shopping malls, cellphone network towers, post offices, roads and freight, among other things.
“The impact of all of this is that we have to do something. We can’t sit back, cry and be sad about it,” Mboweni said.
Sasria had, with the help of other insurance companies, started assessing the damage to assist businesses to get back on their feet, he said.
“We anticipate this will cost may R15bn to R20bn, and between Sasria and the National Treasury, we will have to make sure [this is] met,” he added.
Sasria boss Cedric Masondo was confident they would be able to pay almost all the claims. He said the association’s balance sheet in terms of assets was about R9.7bn. There was also about R6.5bn which would be recovered from reinsurance, he said.
“Liquidity is not an issue at the moment because that money is already in our balance sheet and we have also lodged the claims against the reinsurance company. Once we start paying the claims, we will recover the money from reinsurance,” said Masondo.
Mboweni refused to speculate on whether the reinstatement of the R350 grant was a precursor to a basic income grant.
“Let’s deal with the situation we confront now,” he said, responding to a question.
The minister said National Treasury had indicated to Ramaphosa that it could only extend the social relief of distress grant by six months.
But a persistent Ramaphosa saw it “cross over the line” and agree to extend it until the end of March 2022.
“The key question this country has to confront is how are we, as a constitutional democracy, a caring society, going to deal with this need to support those who cannot support themselves.
“At the centre of this is that we should make sure our education system works very well and is compatible or relates very well to the needs of the changing economy. The structural nature of our economy demands certain skills,” he said.
He emphasised that it was important to consider some type of work-related activity rather than just giving people a grant.
The Unemployment Insurance Front (UIF) would come to the party in the form of the Temporary Employee/Employer Relief Scheme (TERS), with employment and labour minister Thulas Nxesi expected to make further announcements on this.
Treasury was only willing to say that R5.3bn would be allocated to the UIF for this intervention.
Treasury director-general Dondo Mogajane said the package was being funded with available resources.
“This is not in any way going to include or increase our borrowing requirement,” he said.
The government had “reprioritised” some resources from the departments of small business development and trade, industry and competition.
The former reprioritised R300m from its existing budget and will be transferring the money to Small Enterprise Finance Agency (SEFA) for businesses that need support. The latter reprioritised R700m.
They requested an additional R1.3bn to support insured, but not fully covered businesses, uninsured businesses or businesses where infrastructure had been damaged, and informal businesses.
Qualifying uninsured businesses would be covered, said Mogajane.
Businesses seeking relief would have to be tax compliant, said SA Revenue Service (Sars) commissioner Edward Kieswetter.
“We mean that you should be registered for tax and up to date with all your filings and submissions, and be up to date with all outstanding taxes or have an agreement in place to pay those taxes over a particular period,” he said.
He called on businesses to ensure compliance, which would give them some access to government relief.
He confirmed that Sars had had the best first-quarter revenue collection in five years.
Kieswetter attributed this to the financial sector and mining, where they had seen a better than expected performance in corporate income taxes.
In terms of mining, manufacturing and financial services, they saw increased performance in domestic VAT and with that had a huge focus on revenue recovery. Therefore, a significant component of above-target and above-estimate revenue was a result of compliance, he said.
Treasury’s Ismail Momoniat said they were still conceptualising a workable scheme on how exactly to assist affected companies.
This was difficult as the process of assessing the scale of damage was still ongoing. Once completed, this would assist in identifying what type of businesses to cover.
“This area is taking most of our work, just trying to establish the facts and the data,” he said.