Covid-19 hit on economy deepens

Covid-19 hit on economy deepens

Covid-19 hit on economy deepens
Parliament hears new warning of severe lockdown contraction and job losses

As the government moved to start limited reopening of the economy this week, the Treasury gave shock figures in parliament on how badly SA’s economy could be affected by a prolonged lockdown — and the taxman revealed that the lockdown and the ban on cigarettes and alcohol were costing billions in lost revenue.

South African Revenue Service commissioner Edward Kieswetter said on Thursday that the month to date had seen a shortfall of R1.5bn in excise tax on alcohol and tobacco, and that this, with the economy's very weak performance, had already resulted in a R13bn revenue shortfall for the first month of the fiscal year, which began on April 1.

In a virtual presentation to parliament by the Treasury, Kieswetter cited scenarios compiled by the UN University, UNU-Wider, suggesting that a long “lockdown plus” could result in the economy contracting as much as 16%, with 7-million jobs at risk and tax revenue falling almost 15%. Even a quick recovery would see a contraction of worse than 5%, the scenarios suggest.

The Treasury has yet to update its own growth and fiscal figures, which will look very much worse than those tabled just two months ago in the February budget.

It has promised an adjusted supplementary budget soon, which will reveal how it plans to reallocate R130bn of spending to fund part of the R500bn stimulus package that President Cyril Ramaphosa announced last week, as well as how it plans to find new money to combat Covid-19.

Acting budget office head Edgar Sishi said the Treasury could be ready with an adjusted budget by the end of June, though the February budget must still be adopted by parliament before it can be adjusted.

The Treasury’s update came after a frantic Wednesday evening in which the government published new level 4 lockdown regulations — and rating agency S&P Global took SA's rating deeper into junk territory, downgrading it to three notches below investment grade.

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