30 July 2021 Employment Law Alert

COVID-19 pandemic and unrest support package: what the numbers mean for businesses

On Sunday 25 July 2021 President Cyril Ramaphosa informed the nation that South Africa would move to an adjusted Alert Level 3 lockdown from 26 July 2021. In the same address, the president announced a fiscal support package to respond to the recent unrest in KwaZulu-Natal and Gauteng.

As South Africans try navigate their way through these tumultuous times, it is estimated that the unrest has cost the country’s already delicate economy well over R20 billion and countless jobs will be lost as a result of the damage caused. In buttressing President Ramaphosa’s statements about an unrest support package, on 28 July 2021 Finance Minister Tito Mboweni announced the National Treasury’s plans to assist businesses that have suffered losses as a result of the unrest.

Minister Mboweni acknowledged that South Africa’s fiscal remains strained and ominously stated that the country now “consumes R1 out of every R5 raised in taxes”. Against this sombre backdrop, he offered some good news by saying that the National Treasury is in the process of developing a COVID-19 pandemic and unrest support package to assist the South African Special Risk Insurance Association (Sasria) with paying out claims from affected businesses.

Minister Mboweni added that Sasria, with the backing of Government, will have a mandate to honour the claims of “all insured businesses”. With respect to businesses that are not insured by Sasria, Government will seek to provide assistance through reprioritisation of the existing support mechanism for small, medium and micro enterprises. Furthermore, Government will engage stakeholders such as NEDLAC, the banks and insurance companies, to deal with the challenges faced by uninsured businesses.

The minister said that the package will amount to roughly R38,9 billion of “on-budget items”. Importantly, he stated that fiscal indicators show that Government is ahead of its revenue estimate to accommodate the fiscal relief measures and the package will therefore be accommodated without an increase in debt.

In the package, spending measures will include:

  • A temporary reintroduction of the R350 Social Relief of Distress grant until the end of the financial year, at a cost of roughly R26,7 billion.
  • Increased financial backing of Sasria.
  • Supporting small businesses not covered by Sasria with an amount of R2,3 billion, with the assistance of the Department of Small Business Development and the Department of Trade, Industry and Competition.
  • A further R950 million to be allocated to the South African Police Service and the South African National Defence Force.

These measures are a step in the right direction as Government seeks to repair an already fragile relationship with business and restore investor confidence in South Africa. The events of the past few weeks have shown South Africans at their best, but regrettably also at their worst, and the country now holds a collective breath in the hope that a new dawn will emerge.

download PDF

The information and material published on this website is provided for general purposes only and does not constitute legal advice.

We make every effort to ensure that the content is updated regularly and to offer the most current and accurate information. Please consult one of our lawyers on any specific legal problem or matter.

We accept no responsibility for any loss or damage, whether direct or consequential, which may arise from reliance on the information contained in these pages.

Please refer to the full terms and conditions on the website.

Copyright © 2021 Cliffe Dekker Hofmeyr. All rights reserved. For permission to reproduce an article or publication, please contact us cliffedekkerhofmeyr@cdhlegal.com

You may also be interested in