Government reprioritising funds to fight Covid-19

The outbreak of the coronavirus is a classic example of what has been called a “black swan” phenomenon — it has been both unexpected and unpredictable. With South Africa in a recession and government debt growing, it has hit at a time when there is little extra money to tackle the pandemic. As a result, money is being moved around inside the government — from one department to another — to fund the state’s response.  

With President Cyril Ramaphosa on Monday evening announcing a 21-day lockdown, the economic effects of Covid-19 had to be mitigated. To that end, on Tuesday the government announced the first phase of a social and economic package that is aimed at ensuring that businesses, individuals and various large sectors of the economy that are essential to the country’s supply chain are protected during the 21 days.  

The total amount of money that the government has set aside to deal with the impacts of the virus have not yet been finalised. On Tuesday, treasury director general Dondo Mogajane told reporters at a media briefing with ministers in the economic cluster that the government will be reprioritising some funds to deal with Covid-19. 

With the pause of non-essential travel across the different spheres of government, the state is saving about R280-million that can be used to fight the pandemic, Mogajane said. 

The new suite of measures was described by Trade and Industry Minister Ebrahim Patel as “unprecedented”, as South Africa deals with the containment of the virus that threatens to bring the country’s economy to a halt. 

Patel said that South Africa would need strong partnerships between people, large and small businesses, workers and consumers. 

Solidarity Fund

One step has been the creation of the Solidarity Fund. This, the president said, would help those people who are vulnerable to the economic shock of Covid-19. R150-million in seed funding has already been allocated: R100-million from the national treasury and R50-million from the national lotteries. 

Ordinary South Africans will also be able to make contributions to the fund.

As part of the government’s interventions for businesses to mitigate the effects that the lockdown period will have on their operations, the Industrial Development Corporation (IDC) and the department of trade and industry have set aside more than R3-billion. This will “fast-track funding for companies that are critical to fight the virus and its economic impact”, said Patel.

The funds will be available to South african-owned businesses. R500-million will be allocated for trade finance to import essential medical products. R700-million will be for working capital, equipment and machinery.

Essential services that fall outside the IDC mandates will also be considered. Existing IDC clients that may be hit by the effects of Covid-19 on their businesses operations will be eligible for payment deferments. These will be looked into on a case-by-case basis. 

To protect consumers from potentially price surges on essential items such as sanitary and hygiene products, maize, canned goods and other products. the competition commission will impose heavy penalties and fines on businesses that hike the prices of these goods during the isolation period. 

Patel said that the department and the competition authorities are already investigating 11 companies that have been found to have hiked prices of essential items after the declaration of a national disaster by Ramaphosa earlier in the month. 

More companies are being investigated and prosecutions will follow, he said.

If found guilty of hiking prices of essential goods, companies are liable for fines and penalties of R1-million, or 10% of a company’s turnover, or up to one year in jail. 

Don’t panic-buy

With the lockdown starting at midnight on Thursday, videos of people buying food in bulk have circulated across social-media platforms. On Tuesday, Agriculture Minister Thoko Didiza urged South Africans to not panic during this time because the country has enough food to sustain itself. 

“Panic-buying will only cause disruptions and inconvenience in the food system”, she said. 

Didiza added that agriculture and food production in all its forms will remain uncompromised. This includes  services such as veterinary services and advisory services, which will continue to operate to support the producers. 

Exports and imports of critical agriculture commodities will proceed to ensure the continuity of global and national food supplies.

Her department has also put aside R1.2-billion to help address the effects of the coronavirus in the industry and ensure sustainable food production after the pandemic. R100-million will also be made available to farmers who are under distress and have loans to pay. 

During the lockdown period, small businesses may apply for debt-relief assistance from the department of small business and development. The department has set aside R500-million to assist small businesses. 

All South African-owned small businesses are eligible, including spaza shops. To receive assistance, businesses must be tax compliant and wholly South African-owned. The assistance will be assessed according to individual companies’ cash flow and debt burden. 

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Thando Maeko
Thando Maeko is an Adamela Trust business reporter at the Mail & Guardian
Tshegofatso Mathe
Tshegofatso Mathe
Tshegofatso Mathe is a financial trainee journalist at the Mail & Guardian.

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