COSATU calls for $53bn stimulus plan

South Africa‘s largest trade union federation COSATU on Tuesday urged the government, companies and financial institutions to fund a roughly R1 trillion ($53 billion) economic stimulus plan to cushion the blow of the coronavirus pandemic.

COSATU is one of the main partners of the governing African National Congress and sits on the National Economic Development and Labour Council, which President Cyril Ramaphosa has been consulting on ways to mitigate the impact of the virus.

Ramaphosa will address the nation later on Tuesday on a new set of social and economic interventions, after imposing one of the strictest lockdowns on the continent late last month to try to contain the spread of the virus.

Africa‘s most industrialised economy has the highest number of confirmed cases in sub-Saharan Africa, at 3 300, with 58 deaths, as of Monday.

COSATU parliamentary coordinator Matthew Parks said the group’s stimulus plan would help prevent a massive economic contraction and resultant unemployment, which was already running at 40% by a broad definition before the coronavirus crisis.

“We need a massive stimulus plan which can’t just be public funds. From the government side, there could be tax interventions, a scaling-up of social grants, but private firms including the banks should match every cent,” he said.

“If you do a meek stimulus plan it gets you back to 40% unemployment. We need something on the scale of the Marshall Plan after World War Two.”

Parks said raising the budget deficit beyond a 6.8% of gross domestic product (GDP) projection in February was the lesser of two evils, given the risk that half the country could be out of work without appropriate action.

A spokeswoman for Ramaphosa did not immediately respond to a request for comment.

Some business leaders told Reuters they agreed that there needed be a significant increase in stimulus measures, but thought the figure of R1 trillion, equivalent to roughly 20% of South Africa‘s 2019 GDP, was too high.

The government may also be wary of allowing a steep increase in state expenditure at a time when it is grappling with credit rating downgrades and higher borrowing costs linked to the coronavirus crisis.