The national lockdown has seen many poor South Africans experience dramatic income losses, and supplementary spending at this point is needed to support those who are most vulnerable.President Cyril Ramaphosa did a stellar job shutting down SA. As difficult as that was, the really hard work starts now: How does he make sure the bulk of the economy is operational when the Covid-19 lockdown ends?
Therefore, supplementary spending at this point is needed to ensure the state is able to raise sufficient revenues in the longer term to support those South Africans in need, and to keep the bulk of public servants employed.All spending should be ring-fenced into a special Covid-19 budget. The funding for this needs to be clearly understood ]ahead of time.
Government should be looking at using existing mechanisms like the SA Revenue Service to disburse the wage support payments from the Unemployment Insurance Fund as the fund's capacity appears to be limited. Covid-19 relief should be available to all tax compliant businesses that have been impacted, regardless of ownership structure. We need to retain as many jobs as possible, which means retaining as much productive capacity as possible.
Given the capacity constraints of the state, it is important that any such support uses existing and functioning mechanisms. A group of economists recently proposed a “top-up” in the child support grant as the best mechanism “to support precarious households”. A mid-month top-up grant of R300 to R500 per month for the duration of the lockdown would alleviate pressure in low-income households.
It is true that many of the structural adjustment programmes the IMF has historically implemented have left large scars on countries. Notwithstanding the past, the thinking in the institution has evolved significantly, particularly in the wake of the Asian crisis in the late 1990s. In the long-term, the local bond market should be the primary financier of the SA government. One of the best protections the country has is a very long-term debt profile that is primarily denominated in rand. This combination provides a great deal of protection in a crisis. The government needs to ensure it is able to borrow in the local bond market at affordable interest rates.
Source: Financial Digest (financialdigest.net)
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