@

South Africa COVID-19 Stimulus Package And Government Response

Like so many other countries around the world, South Africa was faced with responding to the COVID-19 pandemic. Here's how both the government and the reserve bank reacted.

South African Reserve Bank

On 20 March 2020, the South African Reserve Bank, the country's central bank, cut its benchmark repo, or repurchase, rate by 100 basis points to 5.25% from 6.25%. On 15 April it reduced it further by 100 basis points to 4.25%, and on 22 May it cut it another 50 basis points to 3.75%.[1]

The bank also increased liquidity available to the banking sector by raising the size and duration of repo facilities and by buying government bonds. Together with banks and the National Treasury, the Reserve Bank implemented a guaranteed loan programme for small and medium-sized enterprises (SMEs) to be used for operational expenses such as salaries, rent and lease payments, and payments to suppliers.

The Reserve Bank's Prudential Authority, which regulates the country's banks, insurance companies and other financial institutions, lowered liquidity coverage ratios and capital requirements for the nation's banks. It also provided capital relief on restructured loans that were in good standing prior to the crisis.

South African Government

The South African government introduced several "unprecedented" measures to protect the country's people and businesses during the pandemic.[1]

On 18 March, the government announced a Debt Relief Fund to help SMEs meet their debt repayment obligations. The Business Growth or Resilience Facility will provide funds for working capital, inventory, bridge financing and other purposes for SMEs involved in the manufacturing or supplying of products in short supply due to the virus.[1]

There's also the Employment Tax Incentive (ETI), which is a cost-sharing agreement with the government. It provides employers with an immediate cash benefit to encourage them to hire workers between 18 and 29 years of age.[1]

The COVID-19 Temporary Employee/Employer Relief Scheme provides a special unemployment benefit for people who have lost all or part of their income as a result of the pandemic. The programme also provides benefits to workers who had to quarantine for 14 days as well as a death benefit to the families of those who died from the virus.[1]

Disclosure

These materials constitute marketing communication and do not take into consideration your personal circumstances, investment experience or current financial situation. The content is provided as general market commentary and should not be construed as containing any type of investment advice, investment recommendation and/or a solicitation for any investment transactions. This market communication does not imply or impose an obligation on you to perform an investment transaction and/or purchase investment products or services. These materials have not been prepared in accordance with legal requirements designed to promote the independence of investment research and are not subject to any prohibition on dealing ahead of the dissemination of investment research.

FXCM, and any of its Affiliates, shall not in any way be liable to you for any inaccuracies, errors or omissions, regardless of cause, in the content of these materials, or for any damages (whether direct or indirect) which may arise from the use of such materials, services and their content. Consequently, any person acting on them does so entirely at their own risk. Please ensure that you read and understand our Full Disclaimer and Liability provision concerning the foregoing Information, which can be accessed here.