President Cyril Ramaphosa outlined various measures to support companies and workers, including a R200-billion loan guarantee scheme to assist enterprises negatively affected by the Covid-19 lockdown, as part of a broader R500-billion social and economic relief package unveiled on Tuesday night.

The package, released following extensive consultations with stakeholders and after two special Cabinet meetings, is designed to respond to the devastating economic and social fallout that has accompanied government’s response to the pandemic.

The response is widely accepted to have been necessary to ensure that the Covid-19 virus did not spread at a pace that overwhelmed the country’s health system. Nevertheless, it has left firms at risk of closure, is threatening millions of jobs and is already resulting in severe hunger among the country’s most vulnerable citizens.

In a televised address 25 days into a lockdown instituted on March 26 and which will persist until the end of April, Ramaphosa acknowledged that the response had “disrupted your lives and damaged our economy”.

He said the pandemic required an economic response equal to the scale of the disruption it was causing and described the emergency relief programme as "historic".

The support for companies and workers forms part of a four-part package that also includes an extraordinary health Budget to strengthen the fight against the virus; a series of measures designed to relieve hunger and social distress and plans for a phased re-opening of the economy.

Full details of the adjustment Budget will be tabled by Finance Minister Tito Mboweni in the coming days, while Ramaphosa will address the nation again on Thursday April 23 to provide additional details regarding the further phased re-opening of the economy.

“We will follow a risk-adjusted approach to the return of economic activity, balancing the continued need to limit the spread of the coronavirus with the need to get people back to work.”

LOAN GUARANTEE SCHEME

A major new feature of government's support for business was Ramaphosa’s confirmation of a R200-billion loan guarantee scheme, which would be implemented in partnership with South Africa’s major banks, the National Treasury and the South African Reserve Bank.

“This will 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 would be eligible and it was anticipated that the scheme would support over 700 000 firms and more than three-million employees through this difficult period.

“A number of the banks are ready to roll out the product before the end of the month,” Ramaphosa announced.

Also announced was an additional R100-billion for protection and creation of jobs.

No details were provided, but the allocation appeared to be additional to the R40-billion set aside for income support payments for workers under the Temporary Employer/Employee Relief Scheme (TERS), which is being administered by the Unemployment Insurance Fund (UIF).

Ramaphosa announced that, as of April 21, the UIF had paid out R1.6-billion in TERS benefits, assisting over 37 000 companies and 600 000 workers.

He also announced that an additional R2-billion would be made available to assist small businesses and spaza shop owners. “Government is also working on additional support measures for vulnerable and affected sectors like the taxi industry.”

MORE TAX RELIEF

Various additional tax measures were also unveiled, which Ramaphosa said should provide at least R70-billion in cash-flow relief or direct payments to businesses and individuals.

Among the measures announced were the introduction of a four-month holiday for companies’ skills development levy contributions; the fast-tracking of Value Added Tax refunds; a three-month delay for filing and first payment of carbon tax; and a 10% deduction from taxable income for those who donate to the Solidarity Fund.

“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%.”

Businesses with a turnover of more than R100-million a year could apply directly to the South Africa Revenue Service on a case-by-case basis for deferrals of their tax payments.

The other main health and social components of the package unveiled by Ramaphosa included:

• The reprioritisation of some R130-billion within the current Budget towards health.
• Additional funding of R20-billion for municipalities for the provision of emergency water supply, increased sanitisation of public transport and facilities, and the provision of food and shelter for the homeless.
• An additional R50-billion allocation for various social grants, which would result in the child support grant rising by an additional R300 in May, and by an additional R500 a month from June to October. All other grant beneficiaries would receive an additional R250 a month for the next six months.
• A special ‘Covid-19 Social Relief of Distress’ grant of R350 a month for the next six months to be paid to individuals who are currently unemployed and do not receive any other form of social grant or UIF payment.

Ramaphosa indicated that the package would be funded through a combination of domestic and foreign sources and confirmed that the National Treasury was in talks with various foreign funders, including the World Bank and the International Monetary Fund.

“Some of these institutions have created financing packages that are aimed at assisting countries that are having to address the coronavirus crisis like us. This funding will be used, in the first instance, to fund the health response to coronavirus.”