Thebe Mabanga
Government has marshalled at least R 7 billion from its own resources as well as private donors to help cushion the blow of the COVID-19 pandemic as it announced a three-week shutdown from midnight on Thursday.
President Cyril Ramaphosa announced a set of interventions that he described as “quick and targeted” to help curb the spread of a virus that saw the number of cases jump from 274 to 402 on Thursday, the highest single day increase since the virus was detected in South Africa in early March.
Ramaphosa announced the formation of a Solidarity Fund, with R 150 million seed funding from government, set to be complemented by the private sector and open to individuals, as well as local and international donors.
“The Fund will focus efforts to combat the spread of the virus, help us to track the spread, care for those who are ill and support those whose lives are disrupted…it will complement what we are doing in the public sector,” said Ramaphosa.
“We will be spending money to save lives and to support the economy.”
The fund will be chaired by leading businesswoman Gloria Serobe, with Hollard Chairman Adrian Enthoven as her deputy.
Ramaphosa also announced a donation of a R 1 billion each by the Rupert and Oppenheimer families to assist small businesses and their employees affected by the coronavirus pandemic.
Ramaphosa cautioned against profiteering by companies supplying essential goods during the crisis, noting “this cannot be allowed” as well as panic buying from consumers.
“It is important for all South Africans to understand that the supply of goods remains continuous and supply chains remain intact,” the president said.
Ramaphosa said a safety net is being devised to support persons in the informal sector, where most businesses will suffer as a result of this shutdown.
“More details will be announced as soon as we have completed the work of assistance measures that will be put in place.”
The National Payment System remains fully functional, with all channels remaining open, including ATMs, retail point of sale devices, Post Offices and cash pay points.
Ramaphosa also announced support for people whose livelihoods will be affected.” We are in consultation on a proposal for a special dispensation for companies that are in distress because of COVID-19.”
Affected employees will be paid through the Temporary Employee Relief Scheme, which will enable companies to pay employees directly and avoid retrenchment. Any employee who contracts the virus at their workplace will be paid through the Compensation Fund, as proposed by Labour and employment Minister Thulas Nxesi when the State of Disaster was declared last Monday.
As expected, commercial banks have been exempted from provisions of the Competition Act to enable them to develop common approaches to debt relief and other necessary measures.
Ramaphosa said government has met with all the major banks and expect them to put measures in place “within the next few days” Banks have started announcing payment holidays to customers.
“Many large companies that are currently closed have accepted their responsibility to pay workers affected. We call on larger businesses in particular to take care of their workers during this period.”
Government has also resolved to use the Unemployment Insurance Fund if necessary, to extend support to workers in Small and Medium sized Enterprises and other vulnerable firms who are faced with loss of income and whose companies are unable to provide support. Details of this support are yet to be provided.
There is also assistance for businesses that may be in distress. This starts with a tax subsidy of up to R500 per month per employee for the next four months for those private sector employees earning below R6500 under the Employment Tax Incentive. This is expected to assist over 4 million workers.
“The South African Revenue Service will also work towards accelerating the payment of employment tax incentive reimbursements from twice a year to monthly to get cash into the hands of compliant employers as soon as possible,” the president announced.
Tax compliant businesses with a turnover of less than R50 million will be allowed to delay 20% of their pay-as-you-earn liabilities over the next four months and a portion of their provisional corporate income tax payments without penalties or interest over the next six months.
This intervention is expected to assist over 75 000 small and medium enterprises.
Also being explored is the temporary reduction of employer and employee contributions to the Unemployment Insurance Fund and employer contributions to the Skill Development Fund.
Ramaphosa did not announce how much these might save.
The Department of Small Business Development has made over R500 million available immediately to assist small and medium enterprises that are in distress through a simplified application process while the Industrial Development Corporation has put a package together with the Department of Trade, Industry and Competition of more than R3 billion for industrial funding to address the situation of vulnerable firms and to fast-track financing for companies critical to our efforts to fight the virus and its economic impact.
The Department of Tourism has made an additional R200 million available to assist SMEs in the tourism and hospitality sector who are under particular stress due to the new travel restrictions.
“I want to make it clear that we expect all South Africans to act in the interest of the South African nation and not in their own selfish interests.”
Ramaphosa reaffirmed the credentials of the South African financial system, which were strengthened during the Global Financial Crisis of 2008.
“South Africa has a safe, sound, well-regulated and resilient financial sector. Since the global financial crisis, we have taken steps to strengthen the banking system, including increasing capital, improving liquidity and reducing leverage.”
With a strong financial sector and deep and liquid domestic capital markets, we have the space to provide support to the real economy.
“We can make sure money flows to firms and households,” he said.
Ramaphosa pointed to last week’s decision by the Reserve Bank to cut rates by 100 basis points as a further supportive measure.
“The South African Reserve Bank has also proactively provided additional liquidity to the financial system,” he said without specifying how and when this was done.
“The Governor has assured me that the Bank is ready to do ‘whatever it takes’ to ensure the financial sector operates well during this pandemic.” Ramaphosa said, in reference to Reserve Bank Governor Lesetja Kganyago, who last week told media and analyst that he saw no need to use extraordinary measures through the crisis.
The Reserve Bank, the Johannesburg Stock Exchange (JSE) and the banks will operate as normal.
“The action we are taking now will have lasting economic costs. But we are convinced that the cost of not acting now would be far greater,” Ramaphosa said.
“We will prioritise the lives and livelihoods of our people above all else, and will use all of the measures that are within our power to protect them from the economic consequences of this pandemic. In the days, weeks and months ahead our resolve, our resourcefulness and our unity as a nation will be tested as never before.”
