In addition, such support has come at the expense of a massive rise in the fiscal deficit. While it is a key component of the stimulus package linking government support through banks to the private sector, its disbursement has been slow and subject to the strict credit criteria of South Africa’s financial institutions. The credit guarantee scheme, which constitutes two-fifths of the stimulus package, requires the private banking system to extend loans to firms in distress. Ultimately, the South African government’s stimulus package has been large by global standards and the reach in terms of support to the poor and vulnerable has been impressive. The significant reach of the social assistance component-at just under two-thirds of the country’s population-is to be commended.īrahima Sangafowa Coulibaly, Ngozi Okonjo-Iweala, Vera Songwe, Tidjane Thiam, Donald Kaberuka, Trevor Manuel, Abderrahmane Benkhalfa, and Strive Masiyiwa Tuesday, September 8, 2020 Together, with the existing Child Support Grant that already reaches 13 million children and 8 million caregivers along with other grants reaching about 5 million recipients, President Ramaphosa’s package has the potential to provide much-needed support to about 36 million people, or 61 percent of the South African population. Given the eligibility criteria for the COVID-19 grant and a few assumptions pertaining to takeup, we estimate that the grant has the potential to reach up to 10 million individuals. Īs of mid-October, 18.5 million COVID-19 grants were distributed to 6 million unique individuals since May, resulting from more than 9 million applications. Notes: *The assumptions around eligibility and takeup for the COVID-19 grant are discussed in Bhorat, Oosthuizen & Stanwix, 2020. Source: NIDS (2017), GHS (2018), and Department of Social Development (2020). COVID-19-induced changes to social assistance in South Africa, by grant type Indeed, in previous research, we have shown that the distribution of the COVID-19 grant has been relatively pro-poor: For every grant recipient in the richest quintile of households, more than five other recipients live in the poorest. The president’s October announcement included a further extension of the availability of the COVID-19 grant, given its impressive reach (4.2 million previously unreached individuals) in just four months (equivalent to the growth of the grants system in the last 10 years) and subsequent poverty-reducing effects. The COVID-19 grant is targeted at individuals above the age of 18, unemployed, and neither receiving any income nor any other social grant or support from the UIF. Notably, about 10 percent of the stimulus package, or $3.2 billion, was allocated to social assistance, including an expansion of cash transfers or social grants at both the intensive (the amount of every existing social grant was increased) and extensive (a new, special COVID-19 Social Relief of Distress grant was introduced) margins, for six months from May to October 2020. Authors’ own calculations.Īpproximately 90 percent of the stimulus package was allocated to additional health support, assistance to municipalities for the provision of basic services, wage protection through the Unemployment Insurance Fund (UIF), further income support through the tax system, financial support for small and informal businesses, and-the largest component-the credit guarantee scheme. COVID-19 stimulus expenditure, by country (% of GDP) Even when only examining “above-the-line” expenditures by government, South Africa is spending enormous amounts of money to get the country back on its feet. As a share of GDP, South Africa’s package represents the largest in the emerging markets notably larger than several high-income countries, including South Korea and Canada. The Ramaphosa COVID-19 stimulus package, originally announced on April 21, is huge, amounting to approximately $26 billion, or 10 percent of the economy’s GDP (Figure 1). Junior Researcher - Development Policy Research Unit
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