Government to allow workers to access retirement funds in order to deal with COVID-19 pandemic

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Government says it will allow workers to access a portion of their Pension Fund to help them to deal with the economic impact of the COVID-19 pandemic.

Deputy Director General at National Treasury Ismail Momoniat says once an agreement on the matter has been finalised at NEDLAC, a legislation will be tabled. National Treasury has announced that it has allocated R36,1 billion to social relief measures to help South Africans to deal with the economic impact of the pandemic and the unrest that recently engulfed the country.

“There’ll be a very limited, with emphasis on the word limited, withdrawal but it will be done with a tightening of reservations.  So you can’t withdraw those funds beyond what will be allowed. So what I anticipate and and I’ve been asked this many times in parliament, there’s a bill from one of the parties as well,  is that once we, and we are close to an agreement. Once we get an agreement, we will try and table the legislation,” says Momoniat.

Finance minister Tito Mboweni outlines the economic relief support plan:

Relief package welcomed

Economists and organised business have welcomed announcements made by the National Treasury.

CEO of Business Unity South Africa (BUSA), Cas Coovadia, says the relief packages will be good for businesses and workers who have been the hardest hit by the social unrest, COVID-19 and the worsening economic situation in the country.

“Although a lot of work still needs to be done and lots of details still need to be unpacked, National Treasury has given us a good sense of what’s been done and have also given us information that we believe is important in a broader economic and fiscal situation we find ourselves in,” says Coovadia.

Economist Iraj Abedin says the relief measures are long overdue.

“There was almost no choice for the government but to offer a package of support for households and businesses. So it’s a welcome measure and hopefully this will also start a conversation on how to revive economic growth. I think it has highlighted the performance of the mining sector over the last few months that has enabled the government to provide this kind of emergency relief. ”

Economist Lumkile Mondi says they had expected the minister to announce a long-term stimulus package given the devastation COVID-19 had on the economy and employment.

“We expected the minister to announce a long-term stimulus that was long term in nature that is aligned to what we have seen globally. I believe such short-term measures are likely to bring more challenges and crisis in our economy. We need much more boulder, stronger relief measures,” says Mondi.

On the announcement that government will not borrow further to fund these measures, industry experts say the news will be gladly welcomed by rating agencies and investors.

“Tito Mboweni had to choose if new money would be made for grants in order to support households and businesses or existing spending would be moved to fund the additional expenditure. The good news is government is sticking to its guns to reduce debt, which should be good news as well for rating agencies looking at South Africa,” says PWC economist, Lullu Krugel.

“What is positive is that this is not going to result in an increase in debt. So, essentially the better than expected tax revenues plus budget re-allocation is going to be sufficient to fund the relief efforts, so our fiscal framework that was published in February this year remains intact,” says Alexander Forbes chief economist Isaah Mhlanga.

Unpacking Tito Mboweni’s economic support package: