Ramaphosa’s Covid-19 ‘stimulus’ an attempt to pull wool over SA’s eyes – IRR
23 April 2020
The figure of R500 billion in the Covid-19 economic stimulus and social relief package announced by President Cyril Ramaphosa on Tuesday is disingenuous, for it does not reflect the real value the government is able to add to the economy.
This is partly because R130 billion is to be redirected from other items in the budget. Moreover, R200 billion is a loan guarantee for banks and it is estimated that R70 billion extra will result from various tax relief measures. However, given the dire state of the economy, it is doubtful that such an amount of tax revenue would have been collected in the first place. Therefore the total amount of new money entering the economy is closer to 3% of GDP.
Says IRR Deputy Head of Policy Research Hermann Pretorius: “The relief package was unveiled with much fanfare, but the government risks seeming to be trying to pull the wool over our eyes.”
IRR analyst Nicholas Babaya notes that, given the national lockdown, there is no economy to stimulate. As businesses are prevented from operating, any money they receive will simply go to financing fixed costs. This “stimulus” cannot stimulate if businesses are barred from operating. Thus, the effects of this package will likely be more akin to a one-time welfare package.