/ 13 May 2020

South Africa on track to move to phase three of its Covid-19 economic response

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(Delwyn Verasamy/M&G)

The government is expected to announce more measures to combat the economic devastation of the outbreak of the coronavirus and the subsequent lockdown. This is part of the state’s three-phase economic response to the coronavirus. 

Phases one and two of the government’s economic response include a R500-billion relief plan, which allows for massive spending on social services, as well as tax-relief measures. 

The next phase will detail how the country plans to recover from the economic crisis and embark on a new growth path. This will be announced “soon, when the work has been done”, said President Cyril Ramaphosa in an address to the nation on Wednesday night

As many as seven million people in the country are expected to become unemployed as a result of the coronavirus, according to the treasury’s data released earlier this month. If the lockdown is prolonged, the treasury said the unemployment rate could soar to more than 50%, from its current rate of just less than 30%. 

Despite this, Ramaphosa defended the government’s response to the coronavirus, saying that the measures that have been implemented “match the proportions of the crisis and help to ensure that the foundations of our economy are protected”.

“Our strategic approach has been based on saving lives and preserving livelihoods. Our key objective has always been to slow down the infection rate through a number of interventions in our coronavirus prevention toolbox,” he said. 

The Unemployment Insurance Fund (UIF) has paid out more than R11-billion to two-million workers employed by more than 160 000 companies in distress, Ramaphosa said. 

The government has also provided assistance to more than 27 000 companies through the initiatives of the department of small business development, the department of tourism, the Industrial Development Corporation, and the South African Future Trust. 

More than three million people have applied for the Covid-19 grant of R350 a month for unemployed South Africans who receive no other form of assistance from the government. This is in addition to the R5-billion that the government has paid out to social-grant recipients. 

To support the government’s efforts, Ramaphosa said that the Solidarity Fund has received R2.7-billion in commitments from more than 175 000 individuals and more than 1 500 companies and foundations.

On Wednesday, the treasury announced that the budget adjustments will be finalised in June. Part of the funding sources for the Covid-19 relief package is a R130-billion repriotatison of the February 2020 budget

“The special-adjustment budget seeks to modify the 2020-21 budget to utilise current baseline allocations to provide for the rapidly changing economic conditions and enable spending on the Covid-19 response,” the treasury said.

All other adjustments will be tabled in October during the medium-term budget policy statement. 

In the meantime, Ramaphosa said that certain changes to level four restrictions will be announced, such as the opening up of business activities “in the retail space and e-commerce, and reduced restrictions on exercise.” 

By the end of May, Ramaphosa said he will have concluded engagements with different stakeholders that would determine how some of the country will move from level four to level three of the government’s coronavirus restrictions. These consultations will also inform which parts of the country move to different lockdown levels, and which remain on level four. 

Under level three, more economic activities will be permitted, including limited domestic travel with a restriction on the number of flights a day, full mining operations, and the sale of alcohol and tobacco.