On Tuesday (21 April), President Cyril Ramaphosa announced a massive R500-billion economic and social relief package “to stabilise the economy, address the extreme decline in supply and demand and protect jobs.”
The amount is the equivalent of 10% of South Africa’s gross domestic product (GDP) and signals the government’s seriousness in addressing the impact of the COVID-19 pandemic.
“This will include the reprioritisation of about R130 billion within the current budget. The rest of the funds will be raised from both local sources, such as the Unemployment Insurance Fund, and from global partners and international finance institutions,” Ramaphosa said.
The relief package in summary
R20 billion will be directly used to fund the government’s health response against coronavirus.
R20 billion will be disbursed to municipalities to provide emergency water supply, increased sanitisation of public transport and facilities, and providing food and shelter for the homeless.
R50 billion will be used to relieve the plight of those who are most desperately affected by the coronavirus.
Child support beneficiaries will receive an additional amount of R300 in the month of May 2020, and an additional amount of R500 each month from June to October 2020.
Other grant beneficiaries will receive an additional R250 per month for the next six months.
South Africans who are currently unemployed and do not receive any other form of social grant or Unemployment Insurance Fund payment will receive a special R350 COVID-19 Social Relief of Distress grant each month for the next six months.
The government will distribute 250,000 food parcels across the country over the next two weeks.
The government has set aside R100 billion for the protection and creation of jobs.
The Unemployment Insurance Fund’s special COVID-19 benefit scheme has paid out R1.6 billion to assist over 37,000 companies and 600,000 workers.
The government has set aside R40 billion for income support payments for workers whose employers are not able to pay their wages.
R100 million is the value of loans, grants and debt restructuring provided to small, medium and micro enterprises (SMMEs), spaza shop owners and other informal businesses.
The government will make available R2 billion to assist SMMEs, spaza shop owners and other informal businesses.
The Industrial Development Corporation (IDC) is providing R162 million to support companies to procure or manufacture personal protective equipment (PPE).
The government will establish a R200 billion loan guarantee scheme in partnership with the major banks, National Treasury and the SA Reserve Bank to assist enterprises with operational costs such as salaries, rent and the payment of suppliers.
This loan guarantee scheme will assist more than 700,000 firms which have annual turnovers of less than R300 million. About 3 million employees will be supported.
4 months is the period of holiday for companies’ skills development levy contributions and fast-tracking Value-Added Tax refunds.
Companies that file or need to make their first payments of carbon tax will have a 3-month delay period.
The government has reduced the previous turnover threshold for tax deferrals to R100 million per year.
The government has increased to 35% the proportion of Pay As You Earn payment that can be deferred.
Taxpayers who donate to the Solidarity Fund will be able to claim 10% as a deduction from their taxable income.
The government’s tax-related cash flow relief or direct payments to businesses and individuals will amount to R70 billion.
The SA Reserve Bank’s decision to cut the repo rate by 200 basis points unlocked R80 billion into the South African economy.