President Cyril Ramaphosa has come to the aid of SA’s desperately poor by extending the Covid-19 social relief of distress grant of R350 a month for unemployed adults for a year to end-March 2023.
The extension is estimated to cost the fiscus R50bn, expenditure made possible by the mineral resources boom that is expected to raise the 2021/2022 tax revenue target by R200bn.
Details will be provided by Enoch Godongwana, the finance minister, when he tables the 2022/2023 budget on February 23. The grant benefits about 10-million people.
Addressing the nation in his sixth state of the nation address in Cape Town’s City Hall on Thursday night — the National Assembly was gutted in January’s fire — the president signalled an end to the national state of disaster, saying regulations had to be put in place covering social distancing and mask wearing.
He said the government would continue consultations on a replacement for the grant but stressed that this must be affordable and must not be at the expense of service delivery.
Between now and end-March, Ramaphosa said, the government would “engage in broad consultations and detailed technical work to identify the best options to replace this grant. Any future support must pass the test of affordability, and must not come at the expense of basic services or at the risk of unsustainable spending. It remains our ambition to establish a minimum level of support for those in greatest need.”
While there has been much debate — including among Ramaphosa’s own economic advisers — about the introduction of a permanent basic income grant, the cabinet decided against this for now at its meeting this week because of the absence of a funding mechanism. Experts have warned that the introduction of a basic income grant would require tax increases and have highlighted the danger of extending the Covid-19 social relief of distress grant on the grounds that this will be difficult to remove.
Ramaphosa’s speech dealt at length with a renewed impetus for the structural economic reforms that are regarded as critical to unlock economic growth. Ramaphosa acknowledged that fundamental change and fundamental reforms were needed to revive economic growth, a refrain that has been repeated for several years, with little progress being made.
He announced the cabinet had approved an amendment to the Electricity Amendment Act for public comment that “will enable a competitive market for electricity generation and the establishment of an independent state-owned transmission company”.
This is in line with the aim of unbundling Eskom into three separate units: generation, transmission and distribution. On electricity generation, bid window six will be opened soon and requests for proposals for 3,000MW of gas power and 500MW of battery storage would be released this year.
He said the long-delayed auction of spectrum will take place in about three weeks’ time. It will unlock new spectrum for mobile telecommunications for the first time in over a decade.
Transnet will ask for proposals from private partners for the Durban and Ngqura Container Terminals within the next few months, which will enable partnerships to be in place at both terminals by October 2022. It will start the process of providing third-party access to its freight rail network from April 2022 by making slots available on the container corridor between Durban and Gauteng.
The policy and regulatory framework for industrial hemp and cannabis will be reviewed.
On state-owned enterprises (SOEs), Ramaphosa said the Presidential SOE Council, which he appointed in 2020, had recommended that the government adopt a centralised shareholder model for its key commercial state-owned companies.
“This would separate the state’s ownership functions from its policymaking and regulatory functions, minimise the scope for political interference, introduce greater professionalism and manage state assets in a way that protects shareholder value.”
He said that as part of this, preparatory work had begun for the establishment of a state-owned holding company to house strategic SOEs and to exercise co-ordinated shareholder oversight.
“To ensure that state-owned enterprises are effectively fulfilling their responsibilities, the Presidential SOE Council is preparing recommendations on state-owned entities to be retained, consolidated or disposed of.”
Discussions between government and its social partners have started to review labour market regulations for smaller businesses to enable them to hire more people, while continuing to protect workers’ rights.
A redesigned loan guarantee scheme is being introduced to enable small businesses to bounce back from the pandemic and civic unrest of July 2021. The scheme would incorporate lessons from the previous rather unsuccessful loan guarantee scheme, which was launched at the start of the pandemic as part of a R500bn stimulus package.
The scheme will involve development finance institutions and nonbank SME providers in offering finance, expand the types of financing available and adjust eligibility criteria to encourage greater uptake. The National Treasury is working with industry stakeholders to finalise the scheme and will provide details soon.
The Business Act — alongside a broader review of legislation that affects SMMEs — is being reviewed to reduce the regulatory burden on informal businesses and a dedicated capacity in the presidency to reduce red tape has been created.
To encourage hiring by smaller businesses, the criteria for participation in the employment tax incentive will be broadened. Godongwana will announce details in the budget.
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