COVID-19 & Plummeting Rand: What Does It Mean For SA’s Economy?

There have now been three cases of coronavirus confirmed in South Africa and the global economy is feeling the impact of the developing global pandemic. So what does this mean for South Africa’s economy, considering our existing frailties?

On Sunday, Health Minister Zweli Mkize, confirmed that a third person had tested positive for COVID-19.

“A third person has tested positive for COVID-19 virus. This is a person who was part of the group of 10 who had traveled to Italy and had been kept on surveillance,” he told the SABC.

The first case in the country was confirmed on Thursday, a 38-year-old man from Kwa-Zulu Natal who had been on a skiing trip to the European epicenter for the virus, Italy, while a 39-year-old women from Gauteng was later confirmed as the second case in the country. The third is the wife of the aforementioned Kwa-Zulu Natal man. All of them were part of the 10 person group that traveled to Italy. The couple’s two children have been isolated, tested and are currently being monitored for symptoms.


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At the time of writing, there are a total of over 100,000 confirmed cases of COVID-19 around the world, with more than 3,500 people dying as a result of the virus. The good news, however, is that even though there are three confirmed cases of COVID-19 in South Africa, none of the patients contracted the virus within our borders and said patients are being treated in isolation, making a full-scale outbreak unlikely for the time being. With that said, whether you’re directly impacted by the virus or not, one way that the virus will impact every person on earth is through their wallets.

Fin24 has reported on the moves made by OPEC nations such as Saudi Arabia to cut oil production and make the biggest price-cuts in the last 20 years after a bust-up with Russia. They also reported on a 3% devaluation of the Rand as of Monday morning, while Tokyo’s Nikkei 225 index dropped by more than 5% and stock markets in Hong Kong, New Zealand, South Korea and Shanghai have all fell by similar margins.

Brent crude oil prices are down by roughly 30% and it is believed that all of these market devaluations are a result of decreased investor confidence over concerns for the coronavirus. Perhaps even more pertinent than that is the tumbling of stocks in the US, with Dow futures falling by more than 1,200 points, or about 4.7% and the NASDAQ falling 4.8%.

“Fears over the virus’s impact on the global economy and a plummet in US yields had investors seeking the safe-haven yen,” Marito Ueda, senior trader at FX Prime told AFP, as reported by Fin24.

“It is essentially flight from the dollar.”

Although it may not seem like it, this actually has an adverse effect on the Japanese economy and stock prices in Nissan, Sony and Toyota have all fallen as a result.

So what does this mean for South Africa? We’re a relatively small player on the global economic stage, but a further devaluation of the Rand shows that we are not immune and the presence of the coronavirus is not going to help much either.

Well… there is one way of looking at things, regarding perhaps the biggest economic development in South Africa over the last year – SAA’s business rescue. American airliners will be losing up to $113 billion as a result of global travel restrictions, with individual carriers losing an estimated $29.3 billion in revenue each. For SAA, who have cancelled many of their domestic routes as of the end of February, further cancellations will be somewhat mitigated by the already-present low investor confidence and revenues. It’s by no means a good thing, but at least the State Owned Enterprise won’t have to deal with the double-whammy of business rescue and coronavirus fears. As for the rest of the economy, this will not be the case.

The first and most obvious industry to be impacted by COVID-19 is tourism. Tourism makes up roughly 2.8% of the country’s GDP, as per a 2018 government analysis (some R139 billion or $8,66 billion). Travel restrictions, particularly with regards to European tourists, will have a massive impact on the industry and fears on behalf of individual tourists over the presence of COVID-19 in South Africa will have an additional impact as well.

The next obvious sector to be affected is healthcare. Frequently either the first or second biggest political expenditure in South Africa is healthcare, which took up 32% of the total spending figures for 2017/18. Although Tito Mboweni already delivered his budget speech at the end of February, the primary focus was on the proposed NHI scheme and providing provisions to fund the ambitious program. He will now need to make emergency provisions for emergency care, educating professionals and several other things. It’s a task far easier said than done and that’s without considering government inefficiencies that will undoubtedly serve as a sinkhole regardless of what new provisions could be made to mitigate the impact of coronavirus. That doesn’t even count in what this could mean for individual consumers and the additional costs for private healthcare insurance companies, as well as extra administrative costs.

Outside of the obvious effects COVID-19 will have on these major sectors of the economy, public service announcements and educating the South African people on the coronavirus and how to handle their daily lives in light of a potential outbreak is another hidden cost. Not to mention, the need for childcare, should schools have to close down. Massive public gatherings, such as sporting events and concerts may also have to be cancelled and then we move onto the ways that the economy as a whole may be affected.

People’s day-to-day lives could change drastically, especially for workers in big corporate companies that house thousands of employees in one building. Engen Oil, for example, has enforced mandatory leave for employees that have gone on overseas trips to COVID-19 epicenters like China. It is likely that other businesses may temporarily have to shut down over concerns for spreading the virus. Those who utilize public transport will face additional risks due to the tightly packed train carriages, buses and taxis. The intricacies involved that play a role in the response to the virus will be far reaching and unpredictable.

There really is no telling exactly how hard the coronavirus is going to hit our economy or whether we have the capacity to handle any potential outbreak. However, the state of the global economy in response to it does not bode well and, with investor confidence already lower than it’s been in decades, we are particularly vulnerable to any adverse shocks to the markets. And, if you’re an investor, there’s pretty much nowhere to run. For the average person, on the other hand, economic shocks always hit the poorest the hardest and this is going to be devastating for the millions of impoverished South Africans.

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