Inside SA’s COVID-19 R500bn stimulus package

The sum, which equals 10% of the country’s GDP, would be split among several programmes aimed at helping businesses, poor people, and municipalities, among others.

Picture: pixabay.com

JOHANNESBURG - President Cyril Ramaphosa on Tuesday evening announced a bold R500 billion stimulus package to keep the South African economy afloat as the country wages a war against the spread of the coronavirus (COVID-19) pandemic.

The sum, which equals 10% of the country’s gross domestic product, would be split among several programmes aimed at helping businesses, poor people, and municipalities, among others.

Ramaphosa made the announcement following a Cabinet meeting which sought remedies to the devastation experienced by South Africans from various walks of life as a result of the national lockdown.

WATCH: Ramaphosa announces R500bn economic stimulus package

Before the crisis hit, South Africa’s economy was already on its knees with a 29.1% unemployment rate, a budget deficit, and shrinking economic growth.

Ramaphosa said government would raise R500 billion to salvage the economy from the cusp of disaster in line with the National Disaster Management Act.

The question – as frequently asked of a deficit budget economy – where would the money come from?

“The rest of the funds will be raised from both local sources, such as the Unemployment Insurance Fund, and from global partners and international finance institutions,” Ramaphosa said.

“To date, the World Bank, International Monetary Fund, BRICS New Development Bank and the African Development Bank have been approached and are working with the National Treasury on various funding transactions," he said.

“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,” the president added.

Ramaphosa said the social relief and economic package was part of the second phase of a series of actions.

Recently, other countries including Canada and the United States announced stimulus packages for - among others - cash grants, loans, and investments.

South Africa’s approach appeared to be following in these footsteps after pressure from civil society and the public at large for government to announce a clear response plan to the catastrophe caused by the COVID-19 pandemic.