01 Apr 2020

Government will introduce a wage subsidy to assist companies to retain employees during the state of emergency period which commences tomorrow, Minister of Finance and Economic Development Dr Thapelo Matsheka has said.

Briefing the media on April1, Dr Matsheka said the first component of the COVID-19 Relief Fund, already capitalised to the tune of P2 billion by government, would be to finance the wage subsidy. 

The structure of the subsidy would be 50 per cent for basic salaries of employees of affected companies ranging between P1 000 and P2 500 per month for three months with possibility of extension, he explained.

He pointed out that some companies would choose to lay off employees while others would opt for paying workers either 100 per cent or a certain percentage adding that the process would allow companies to apply and demonstrate they had been affected by the pandemic.

Dr Matsheka also revealed that government had set aside P1 billion for a loan guarantee scheme, 80 per cent bonded by the state and 20 per cent by commercial banks, to assist tax compliant businesses. 

“You are tax compliant if you are not eligible to pay tax but you are more tax compliant if you pay tax,” said Dr Matsheka. 

He said the guarantee cover was for a period of 24 months with a maximum loan size of P25 million per borrower.

Other measures include tax concessions worth P1 billion, deferment of taxes currently due to March 2021, reduction of VAT refund periods and waiving of the training levy for a period of six months.

Dr Matsheka said government had set aside P200 million for purchasing grain reserves, P35 million to augment water supply, P200 million for emergency medical costs and P40 million for counselling services.

    On monetary policy, Dr Matsheka said Bank of Botswana would review the bank rate and also look at the minimum reserve ratio to ensure enough money was being pushed into circulation to assist communities. 

   For commercial banks, the minister said a three-months moratorium on loan payments would be introduced with banks encouraged to restructure loan payments to extend the payment period.

   Minister Matsheko pointed out that the pandemic would have a profound impact on the structure of the economy which was currently dependent on revenue generated through diamond exports, tourism sector and income generated through SACU membership.

“With national partners we are hopeful to accumulate the necessary resources,” said Dr Matsheka. 

Given the limited resources, Dr Matsheka said the national economic response focused on supporting and sustaining livelihoods to mitigate the impact of the virus during the state of emergency. 

He said businesses needed to be sustained in an endeavor to mitigate the direct impact on workers. 

However, Dr Matsheka said businesses must look at how they could continue to sustain workers in the absence of their normal activity. ENDS