Business has proposed that a basic income grant be paid to the poorest in SA during the Covid-19 crisis, as it is thought the epidemic could put one-million people out of work and leave those who make a living from informal activities destitute.
The proposal has been submitted to the National Economic Development and Labour Council (Nedlac) for negotiation with the government and labour, a representative of Business 4 SA said in briefing on Tuesday. Business 4 SA is a newly established organisation that unites organised business across the spectrum in a bid to mitigate the damaging effects of the crisis.
The organisation has been central to the design of a special Covid-19 unemployment benefit, which will support employees in the formal sector who have been temporarily laid-off during the lockdown. But the benefit can only be accessed by contributors to the fund.
“The area of looking after people who are not in employment is very much on our radar. There is a discussion in Nedlac and communities feel this is an area that has not had proper attention. We have tabled a proposal in Nedlac. There is an affordability issue. This is a question for National Treasury to start answering,” Rob Legh, convener of the B4SA’s work on the labour market said.
Martin Kingston, who is leading work on economic interventions, said it was possible that “as a base case” — that is, if no interventions are made — one-million people could be put out of work permanently, swelling the ranks of the unemployed. The group estimates that SA’s economy will contract 8%-10% in 2020. A return to normal economic activity was expected only in 2021, he said.
The Treasury is yet to put any significant money on the table to assist businesses and people over the crisis. It has offered about R15bn in tax relief to employers. Public finances are under enormous pressure with a growing debt burden that shows no indication of levelling off. The hit to tax revenue as a result of the lockdown is anticipated to exacerbate the fiscal deficit, which economists think will now reach 10%.
Finance minister Tito Mboweni is expected to brief the media on Tuesday afternoon. Also under discussion between business and the Treasury was the prospect of a credit guarantee scheme, in which government would act as a backstop to companies that need to access credit to get back on their feet.
Legh said that while business had not done detailed modelling of the grant, if all recipients of social grants received an additional R500, the cost to the state would R9bn a month. Several economists and development strategists have made the case that while not all vulnerable groups receive welfare grants, the existing grants are well targeted at the poorest sections of society.
Legh said that the business was concerned that the Covid-19 UIF would face some administrative challenges, but that the UIF has assured Nedlac that it was on top of the process. The application process for the benefit was finalised last week. A number of claims by employers — covering about 10,000 employees — had already been made on the basis of a previous process. The UIF has said that these will still be processed, said Legh.
Business was also engaged in discussions with the commissioner of the Compensation Fund, which assists employees who are injured or contract diseases through the course of their work, “to unblock blockages” as a workers in essential services will need to access ongoing medical benefits.
Kingston said that government would need a very significant fiscal stimulus package to rebuild he economy after the lockdown. He also urged the government to honour its commitments to pay public servants the wage increase agreed to 2018. The wage increase should come into effect on Wednesday but as yet there has been no indication that it will be paid.
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