Govt unveils Covid-19 relief package
By Hilary Mare
FINANCE Minister Iipumbu Shiimi yesterday put forward an N$8.1 billion stimulus package to fight the effects of Covid-19, including an emergency basic income grant for the worst-affected people.
The Stimulus and Relief Package includes N$5.9 billion in direct support to businesses, households and cash flow acceleration payments for services rendered to the government, and N$2.3 billion for government liabilities.
“In response to these unprecedented economic hardships the government, in collaboration with all stakeholders, private development partners and other non-state actors, has adopted the first phase of the Economic Stimulus and Relief Package geared at addressing the negative effects arising from the first 21-day lockdown period,” Shiimi said.
Relief for the business sector
To avoid further retrenchments in the hardest-hit sectors, government will provide a wage subsidy to the tune of N$400 million to aid businesses in keeping employees on board in the tourism, travel, aviation and construction sectors.
Government will also accelerate the repayment of overdue and undisputed VAT refunds to enhance the cash flow of enterprises paying VAT. “The total amount of the refunds to settle within one week of the implementation of these measures stands about N$3 billion,” Shiimi noted.
Government will further accelerate payment of some N$800 million in overdue and undisputed invoices for goods and services provided to government to boost the cash flow of enterprises that are suppliers to the government.
Shiimi added that they will facilitate a N$500 million loan scheme for non-agricultural small businesses and guaranteeing such loans to be provided by the Development Bank of Namibia. The loans will be extended to cash flow-constrained small businesses that experienced a significant loss of revenue.
“Government will further facilitate a N$200 million loan scheme for farmers and agricultural businesses and guarantee such loans to be provided by the Agricultural Bank of Namibia. The loans will be extended to cash flow-constrained farmers and small to medium-sized businesses that have experienced a significant loss of revenue.
“Government also proposes granting of the policy relief to borrowers by DBN and AgriBank in the form of a capital repayment moratorium, where a holiday is allowed on the principal amount for a period ranging between six months, but not exceeding two years based on assessment, recapitalization of interest, lengthening of the repayment periods and waiving of penalty provisions,” the finance minister said.
To provide breathing space for cash-strapped businesses in the non-mining sectors that are taxpayers, such businesses can borrow an amount equal to 1/12th of their tax payment in the previous tax year, to be repaid after one year. The interest rate will be favourably low at the prime lending rate less 1%, on the back of the government guarantee, capped at N$470 million.
“To avoid major retrenchments and business closures, employers including government and business owners will be allowed to negotiate a temporary 20% reduction of salaries and wages during the crisis period, and 50% for the worst-hit industries. The negotiations will be undertaken through a consultative process with employees and labour unions,” Shiimi added.
Relief measures for households
To support struggling households to cope with reduced income, increased health-related spending and other hardships due to the virus outbreak government has proposed an Emergency Income Grant, to support those employees who have lost their jobs due to the pandemic and its fallout.
“This is a once-off payment of N$750 to people who have lost their jobs, either in the informal or in the formal sector, essentially to stave off the vulnerabilities which arise.
“Applications may be made by Namibians citizens between 18 and 60 years of age who have lost their jobs and are not receiving any other social grants. Payment will be made by government in collaboration with the Social Security Commission within 7 days utilising the banking sector’s ATM infrastructure. The total amount for this measure is costed at a maximum of N$562 million, based on the national poverty line of about N$250 per person per week,” the finance minister said.
The government has further proposed a tax-back loan scheme for tax registered and tax paying (PAYE) employees and self-employed individuals who have lost income or part thereof.
“To provide breathing room for cash flow constrained individuals who are taxpayers, they can borrow an amount equal to 1/12th of their tax payment in the previous tax year, to be repaid after one year.
“The interest rate will be favourably low at the prime lending rate less 1% on the back of a government guarantee. The total guarantee is capped at the maximum of N$1.1 billion, based on the PAYE tax register and the potential loan size. The government, in collaboration with the banking institutions may institute statutory and administrative measures to enhance compliance with loan obligations,” explained Shiimi.
Government will also ensure that water points are kept open without any need for prepaid water cards during lockdowns, through NamWater and local authorities that will be subsidised to provide this critical service. For the purpose of the first lockdown, the cost of free water is estimated at N$10 million.
Support for the health sector
Shiimi also unveiled government’s plan to make N$1.1 billion available to the Health Ministry to respond to the challenges posed by the threat of Covid-19.
“I wish to reassure the business community, large corporates and the micro, small and medium-sized enterprises in all sectors of our economy that the government will continue to support economic activities, as well as households during the current challenging circumstances and in the recovery phase of our economy. Equally, the government calls for effective partnerships, solidarity and dialogue with all stakeholders during this time of coordinated actions,” Shiimi concluded.