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Treasury unveils R38bn package to help financially battered households and businesses survive pandemic, orgy of violence

Minister of Finance Tito Mboweni. (Photo: Dwayne Senior / Bloomberg via Getty Images)

The biggest intervention is financial support for Sasria – helping the state-owned insurer to expeditiously honour claims from insured businesses whose properties were damaged. The insurer will receive a taxpayer-funded cash injection of R3.9-billion. 

The package of relief measures to support households and businesses affected by the Covid-19 pandemic and the recent violence in KwaZulu-Natal and Gauteng will cost the fiscus (or the South African taxpayer) R38.8-billion, National Treasury has revealed.  

The biggest intervention is financial support for Sasria – helping the state-owned short-term insurer to expeditiously honour claims from insured businesses that have suffered damages to their properties. 

Sasria will receive a R3.9-billion cash injection from the government, said Treasury’s director-general, Dondo Mogajane, on Wednesday. Sasria expects insurance claims arising from the recent looting and anarchy to be so daunting that it cannot independently fund insurance claims from its balance sheet. 

Claims from insured businesses are expected to be between R15-billion and R20-billion, but business partners at the National Economic Development and Labour Council (Nedlac) expect claims to run to more than R30-billion. Sasria only has less than R15-billion (in fact, about R12-billion) on its balance sheet, which is not enough for the insurer to independently settle insurance claims. 

The financial help from the Treasury is a first for Sasria in its 40-year history as the state-owned insurer has relied on its healthy balance sheet and not government bailouts for survival. 

Businesses that don’t have insurance and suffered damages would also get assistance from the government. Treasury said it is still auditing the number of businesses that don’t have insurance cover and working on an appropriate funding mechanism for them. But there are no firm measures on the table yet for uninsured businesses, which are estimated to be many in South Africa because insurance is costly and still viewed as a grudge purchase. 

Mogajane said the R38.8-billion relief package will be funded through Treasury’s existing funding framework and also the reprioritisation (or shifting) of funds from departmental budgets. About R2.65-billion will also be reprioritised from budgets of the departments of Small Business Development and Trade, Industry and Competition to fund a range of relief measures for businesses. Specific measures for small businesses would be unveiled by the two departments. 

Excluding the R2.65-billion that will be reprioritised, this leaves Treasury to find about R36-billion to fund other relief measures – this amount is a new expenditure by Treasury and not included in the existing expenditure framework revealed during the February Budget. The new and additional expenditure is not expected to widen the government’s budget deficit of 14% of GDP in 2020/21 or worsen its debt position (debt-to-GDP is set to remain at 80.3%).  

Mogajane said Treasury won’t increase its borrowing requirements or subscribe to new debt in a bid to fund the R36-billion. It is likely to fund the relief package from its windfall of about R100-billion thanks to the recent commodities price boom. 

The reprioritisation of government budgets will free up additional funding of R250-million for the South African Police Service and an additional R700-million for the South African National Defence Force to “ensure that peace and stability return to communities”.

Other relief measures

Another drastic proposal Treasury is weighing up is allowing financially distressed consumers to cash out a portion of their pension savings. The purpose of this is to help consumers free up cash. The business partners at Nedlac are against this proposal as they believe consumers would raid pension savings to fund their lifestyles of consumption. 

For households, the government has reinstated the R350-a-month Covid-19 social grant, which came to an end in April 2021. This grant will run until March 2022 and is expected to cost Treasury R27-billion to administer.  The grant provides relief to individuals above the age of 18 who are unemployed and do not receive any income or any other social grant. 

Other relief measures for businesses include the extension of Unemployment Insurance Fund (UIF) payments to businesses that were forced to close due to the violence. The UIF programme is expected to process benefits amounting to R5.3-billion. 

Affected businesses will also receive some tax relief, with the pay-as-you-earn tax deferred for three months and the payment of excise taxes by the alcohol industry also deferred for the same period. The government’s employment tax incentive scheme has been extended for four months so that employers in affected industries can claim a tax refund of up to R750 a month for employees earning below R6,500. DM/BM

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All Comments 6

  • SASRIA has been collecting premiums for about40 yrs without a great deal of claims. What has happened to our premiums? Another gravy train for the cadres?

  • Sasria need to be audited by the AG. Secondly I do hope the NPA will ensure that all looters stay for an extended period behind bars.

    • Don’t hold your breath. If you monitor & read some of the articles appearing on some mainstream press websites, in many instances the looters are now being portrayed as victims & those defending their homes & businesses are now being cast as vigilantes. The narrative is changing….

  • If the uninsured get taxpayer bailout, kiss SASRIA goodbye. Why would any business pay premiums in the future?

    hopefully the half a billion SASRIA pays its Swiss reinsurance partners each year will cover most of these claims. If not this, what would be covered by reinsurance?

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