National Treasury will soon submit a revised budget bill to Parliament, Finance Minister Tito Mboweni announced on Friday.
South Africa is not the only country affected by the Covid 19 pandemic. The international economy will shrink sharply this year and hopefully recover sharply next year, and hopefully South Africa will again resume a sustainable growth path, says Mboweni.
Up to R800 billion worth of injections comes to the economy in total in the form of the combined fiscal and monetary aid package announced by the government, he says.
It consists of, among other things, assistance to health authorities, assistance for food distribution, support to the business sector, and support to the banking system.
“Our teams are working closely with Sassa (the South African Social Security Agency), the Banking Association of South Africa and the relevant government departments to find easier payment methods,” Mboweni said of the extra welfare grant announced last week.
“We are doing everything possible to remove everything from the budget that could be postponed, and we are re-channeling the money after that effort.”
An example is the budget for tourism, where no tourism can take place now.
The banks, together with the Reserve Bank and Treasury, also found that R200 million could be unlocked through the national credit guarantee scheme. This will help businesses with a turnover of R300m or less. These are loans within the economic system that can help keep the economy going.
The tax incentives will loosen additional money to keep the economy afloat. Tax relief means more money in people’s wallets, which they can spend in the economy.
The banking sector has announced a set of measures that will help their clients like car and home loans. It will also help the economy.
Mboweni says structural reform must continue, regardless of the Covid-19 crisis. He says labor market policies need to change so that more young people can find work, without discriminating against foreigners.
He gives the example of restaurants, where the majority of employees are now foreigners. He envisages a new labor policy that requires employers to employ more South Africans than foreigners.
Mboweni says people should think more broadly than the role of the state, as the private sector also contributes a lot to keeping the wheels of the economy rolling.
This includes payment holidays on home and car installments and insurance premiums that banks and insurers allow. It is the “government in talks with industries” that helps consumers.
The criticism of a loan from the International Monetary Fund and the World Bank makes a mountain of a molehole, says Mboweni.