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Ramaphosa announces R500 billion economic package to deal with the impact of coronavirus

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Ramaphosa announces R500 billion economic package to deal with the impact of coronavirus

R500bn economic and social support package.

On Tuesday (21 April 2020), President Cyril Ramaphosa addressed the nation on additional economic and social relief measures that form part of the national response to the coronavirus (COVID-19) pandemic.

Ramaphosa announced an R500 billion fund to deal with the devasting economic impact of COVID-19, which amounts to around 10% of GDP.

 

 

Ramaphosa said the “The impact of the coronavirus requires an extraordinary coronavirus budget – of around R500 billion – to direct resources towards fighting the pandemic. This will include the reprioritization of around 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”.

R20 billion for municipalities, resources, shelters, and food

R20 billion will be made available to municipalities for the provision of emergency water supply, increased sanitisation of public transport and facilities, and providing food and shelter for the homeless.

R50 billion for Grants

R50 billion towards a temporary 6- month Coronavirus grant. This means that child support grant beneficiaries will receive an extra R300 in May and from June to October they will receive an additional R500 each month. All other grant beneficiaries will receive an extra R250 per month for the next six months.

In addition, a special Covid-19 Social Relief of Distress grant of R350 a month for the next 6 months will be paid to individuals who are currently unemployed and do not receive any other form of social grant or UIF payment (Department of Social Development will issue the requirements needed to access and apply for this funding).

The Department of Social Development has partnered with the Solidarity Fund, NGOs and community-based organizations to distribute 250,000 food parcels across the country over the next two weeks.

R100 billion for businesses and jobs

R100 billion will be set aside for protection of jobs and to create jobs.

By the end of today, the UIF’s special COVID-19 benefit has paid out R1.6-billion, assisting over 37,000 companies and 600,00 workers.

R40 billion has been set aside for income support payments for workers whose employers are not able to pay their wages.

R2 billion for SMEs, Spaza shops and small businesess

R2 billion will be made available to assist SMEs and spaza shop owners and other small businesses.

The IDC facility to support companies to procure or manufacture personal protective equipment has been utilised in the past few weeks, with finance of R162 million approved to date.

Other forms of support have been extended to artists, athletes and technical personnel, as well as to waste pickers and public works participants in the environment sector.

R200 billion for enterprises

Introduction of a R200 billion loan guarantee scheme in partnership with the major banks, the National Treasury and the South African Reserve Bank – to assist enterprises with operational costs, such as salaries, rent and the payment of suppliers. In the initial phase, companies with a turnover of less than R300 million a year will be eligible.

It is expected that the scheme will support over 700,000 firms and more than 3 million employees through this difficult period.

A number of the banks are ready to roll out the product before the end of the month.

Tax relief

To existing tax relief measures, there will also be an introduction of a 4-month holiday for companies’ skills development levy contributions, fast-tracking VAT refunds and a 3-month delay for filing and first payment of carbon tax.

To assist a greater number of businesses, the previous turnover threshold for tax deferrals is being increased to R100 million a year, and the proportion of PAYE payment that can be deferred will be increased to 35 percent.

Businesses with a turnover of more than R100 million a year can apply directly to SARS on a case-by-case basis for deferrals of their tax payments.

No penalties for late payments will be applicable if they can show they have been materially negatively impacted in this period.

Taxpayers who donate to the Solidarity Fund will be able to claim up to an additional 10 percent as a deduction from their taxable income.

In total these tax measures should provide at least R70 billion in cash flow relief or direct payments to businesses and individuals.

Banks

Several commercial banks and insurance companies have also assisted the economic relief effort by, among other things, delaying or reducing instalment payments, providing debt relief, and waiving bank fees for grant beneficiaries.

Ramaphosa will again address the nation on Thursday, 23 April 2020 on the measures that will be taken beyond the nationwide lockdown to re-open the economy.

 


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