President Cyril Ramaphosa’s Tuesday night announcement of a R500 billion Covid-19 social and economic plan has been roundly welcomed, but questions remain about how it will be implemented and whether this will happen with minimal opportunity for corruption.
Ramaphosa’s plan includes funding to combat the pandemic, money for municipalities for provision of services, grants for relieving the plight of the poorest, funding for job creation, tax relief for distressed businesses, assistance for spaza shops and small businesses, and a loan guarantee scheme for qualifying businesses.
The country is in its fourth week of lockdown, with estimates of over one million job losses this year and the closure of thousands of businesses as a result of the economic shutdown.
A draft document from within the Presidency, leaked to Fin24, revealed the scale of economic devastation envisaged should the lockdown be extended. The tourism, aviation and arts industries will only be able to pay 5% of their staff at the end of May if the lockdown is extended.
Ramaphosa is expected to announce measures to phase out the lockdown on Thursday.
The R500 billion plan has been welcomed as much-needed relief to poor households and those who have lost their jobs, as well as businesses in danger of closing its doors.
But the way it will be rolled out is still far from clear. Experts have warned that funding the massive plan will be a challenge, while opportunities for corruption are many.
In a note, Nascence Advisory’s Xhanti Payi said that offering relief to the poor and vulnerable to deal with hunger was important, and that had the government not “moved in a significant way”, unrest and further violations of the lockdown were on the cards.
However, the government will need to reprioritise the budget.
“The question will be, given that we are entering a new paradigm, is the government willing to be bold in their interventions?”
Economist Mike Schussler told News24 that the plan announced by Ramaphosa was needed and was positive in many respects. Using existing institutions, like the South African Social Security Agency (Sassa) and the Unemployment Insurance Fund (UIF), was important, he said, as these systems were already operational and this reduced the possibility for corruption.
He said that borrowing from the IMF and the World Bank were good choices, because these loans came at a much lower interest rate than had the money been borrowed on the open market.
But, ultimately, how the government is going to find the R130 billion it intends contributing to the fund from the existing budget will be up to Finance Minister Tito Mboweni, who will have to announce this in a mid-term budget speech, soon.
The state’s vast social security net will likely reduce the technical burden of rolling out millions more in grants to vulnerable sectors of society, but new infrastructure will be needed to release a special Covid-19 grant specifically for people not covered by other grants.
In a statement, Corruption Watch said it welcomed the R500 billion, but there were already concerns about corruption and mismanagement in the implementation of food and resource distribution programmes.
David Lewis, the organisation’s executive director, commented: “While the South African government has been widely praised, and deservedly so, for the urgent, honest and science-based response to the virus, it must be candidly recognised that the extension of increased powers to the law enforcement community, procurement officials and elected representatives is open to abuse, and that this has proved to be the case.”
Hennie van Vuuren, director of non-profit organisation Open Secrets, said the lessons from state capture were “very clear”.
“Crisis, which is an ongoing issue in South Africa, has never been an inhibitor for very wealthy people in the private sector and politicians to steal money,” he said.
The vast amount of money being made available by the government, and the need to spend it quickly, creates the opportunity for corruption and malfeasance, he warned.
He said issues around procurement needed to be watched closely.
Grants a ‘resounding victory’ for the poor
A major boon for poor and vulnerable households was an increase in the social grants and the introduction of a special Covid-19 grant for unemployed people without access to any other kind of grant or unemployment insurance.
The announcement was of a child support grant increase of R300 for the month of May, and by R500 a month from June to October, and a smaller increase across all other social grants. A number of experts had lobbied hard for the increase in the child support grant especially, including the Children’s Institute at the University of Cape Town.
The R500 a month increase in that grant was also part of proposals sent to the Presidency by the South African Labour and Development Research Unit (Saldru) at the University of Cape Town, which conducted modeling for the Presidency on possible Covid-19 grant relief options.
Saldru’s research showed that an increase in the child support grant was the fastest way to get money to the largest possible number of poor people.
Saldru’s research showed that, in the poorest half of the population, the child support grant reaches 80% of people in informal worker households. Workers not eligible for UIF claims would have lost roughly 75% of their monthly income during the initial three-week lockdown.
But while the social grant increases is technically easy to administer thanks to existing social grant infrastructure, the special Covid-19 grant would require new infrastructure, so there might be a delay in it reaching the intended recipients.