Stimulus package – a step in the right direction, but raises many questions

2020-04-21
Dr Pieter Groenewald

The economic stimulus package that President Ramaphosa announced is a step in the right direction.

There are, however, certain aspects of the stimulus package that require further clarification and the FF Plus is of the opinion that the payment of the newly allocated social grants must be handled very carefully seeing as people can very quickly become dependent on these grants and that will make it very difficult to take them away in the future.

It is important not to facilitate dependence on the government, but rather job creation and business development.

There is a strong focus on the poor and vulnerable in the country, but it is important to take into consideration that the definition of who the vulnerable in South Africa are has changed. People who were not deemed vulnerable before the period of lockdown and were part of the middle-income group who provided employment have now become vulnerable.

It is imperative to re-prioritise the country's budget.

Important aspects include allocations to the health care budget, the relief of hunger and other social problems, offering support to business enterprises and unlocking the economy.

The FF Plus agrees with the approach of gradually phasing the economy back in based on the risk analysis of the different sectors. That is the logical approach to follow after taking the drastic steps that were necessary to restrict the spread of the pandemic locally.

The party is sticking to its view that no aid must be provided based on empowerment conditions. Equality must apply.

There is still uncertainty regarding the detail of loans to business enterprises and it is not clear what the repayment agreements will entail. Other aspects, like the interest rate and whether it will take place on a deferred repayment basis, also remain unknown.

The FF Plus holds the view that the government should rather have considered implementing tax relief for all sectors, including lowered company's tax, personal income tax and property tax as then it would not be necessary to finance people through direct loans.

The FF Plus has already made various recommendations for how to unlock the economy. Risk analysis is one such recommendation as that will allow certain provisions to be suspended so that people will be allowed to return to work and businesses, like sole proprietorships, will be allowed to start operating again.

The FF Plus hopes that these recommendations will be considered for President Ramaphosa announcement this Thursday.


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