Finance Minister Tito Mboweni says discussions are at an advanced stage between government and stakeholders on the possibility of allowing workers to access their retirement funds to enable them to pay off their debt.
He revealed this while announcing R36.1 billion that the National Treasury has allocated to fund all the social relief measures provided to deal with the impact of COVID-19 pandemic and the recent violence and looting that engulfed the country recently.
Mboweni also said R250 million will be allocated to the police and R700 million to the SA Defence Force following the increased deployment of personnel to deal with social unrest in the country.
Minister Mboweni says government will not borrow further funds for these measures.
In a virtual media briefing, the finance minister said he would ensure that National Treasury speeded up the retirement funds issue.
“I am now determined more than ever before to ensure that the officials in the national treasury speed up this matter. A portion of their retirement fund, workers should be able to access in this difficult time maybe to finish off their bond repayments, maybe to sort out whatever debts they might be in. But I must warn at the same time people must ensure that they use this facility for purposes of relief making better their own situation,” says Mboweni.
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 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: