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The South African government should massively increase its “insufficient” spending to protect the country from the economic and social ravages of the Covid-19 lockdown and the pandemic, says the Institute of Economic Justice (YEI) in a policy document.
The group of experts has released a detailed emergency rescue package that it says could guide the state to move in line with other countries.
YEI says the current R41 billion rescue package is “clearly insufficient” and suggests an initial injection of at least R310 billion just to “partially offset the initial shock”, and another R100 billion to facilitate tax deferral and payments.
And then, additional expense will be required to target high-multiplier economic activity, says YEI. (Here is a description of the multiplier effect.)
YEI says that governments around the world have taken “extraordinary measures”, the UK government is spending 19.3% of its GDP, while South Africa’s response has been “relatively limited”, committing less than one percent, despite numerous viable proposals put forward.
“There is no comprehensive economic response plan”
The YEI Policy Brief is based on proposals made by more than 160 economists and policy experts and suggests a series of interventions to cushion economic hardships and risks.
“There is a significant risk that millions of people in poverty will fall into misery; Millions more, currently on the job, will be driven into poverty and unable to meet their basic needs; and thousands of companies will be forced to close due to falling demand as a result of the blockade, falling revenues and a contraction in economic activity. “
The YEI says that freelancers, atypical informal employees and small businesses are particularly vulnerable, but no one will be exempt from the effects of the crisis.
Traditional social support networks will be affected, and the long-term impact on business capacity and physical, financial and human capital “could be devastating for our already crisis economy.”
In any society that is already deeply unequal, the difficulties “will be tougher for black people, and especially black women and children.”
Source: Overseas Development Institute (ODI) Fiscal and Monetary Policy Response Tracker (April 2, 2020) as presented in YEI proposal
Regarding social grants, “the easiest way to provide support,” the YEI proposes paying a R4,500 Universal Basic Income Grant to each adult in May without a means test. If 85% of adults claim the money, this will cost R150 billion.
The document proposes that all social grants increase by R500 for three months with a mid-month emergency R500 paid in April to all (R36.7 billion).
It proposes an extension of the child support grant to some 670,000 pregnant women (R1.9 billion) and an automatic renewal of disability grants (at no additional cost).
It also proposes that R4.5 billion be spent on 2 million food packages per month for three months.
The YEI says that R20 billion should be set aside for personal protective equipment (masks, gloves, etc.), location of contacts of positive Covid people, testing facilities and quarantine and suggests that “nationalization” should be considered in the short term of beds in private hospitals at cost.
The Unemployment Insurance Fund (FIU) must ensure that it can pay an additional R18.4 billion in claims, as the needs are likely to exceed the R30 billion available through the Temporary Assistance scheme for Employees / Employers . The YEI proposes that the current sliding scale be modified so that 80% of wages can be claimed for low-income workers.
“The strict criteria that limit it to companies closed as a direct result of the virus must be relaxed. It is inappropriate given the dynamic economy. [and] broad nature of economic collapse. “
The government should also consider “regulating” pay holidays for loans from financial institutions, deferral of municipal rates, issuance of electricity vouchers and suspension of water cuts, says the IEJ.
He proposes tax deferrals instead of tax breaks and says consideration should be given to imposing a solidarity tax on people with high incomes.
Business support efforts must include expanded credit facilities and financing through grants and incentives.
Part of the YEI proposal
Part of the YEI proposal
Republished from the base
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