Government scrambles to limit spread of virus
• SA’s stock markets crash to biggest intraday loss to date • Bank under pressure to cut rates
As SA’s stock markets crashed to their biggest intraday loss to date, officials scrambled to implement the drastic measures announced by President Cyril Ramaphosa on Sunday night to curb the spread of Covid-19.
The measures, including the closure of land and sea ports, the revoking of visas from high-risk countries — some of which have been among the country’s biggest sources of tourists and foreign direct investment – will likely have a severe effect on an economy that slipped into a recession in late 2019.
The rapid spread of the coronavirus infection since it emerged in China in December has rattled global stock markets, disrupted supply chains and seen countries impose tight curbs on people’s movements to try and slow transmissions and lessen the effect on their health systems.
The JSE’s all share index sank more than 12% at one point, according to Bloomberg , while a tumble by the country’s 10-year bonds, a key measure of foreign investors’ willingness to lend to the government, pushed yields to the highest since 2008, when the global financial crisis was nearing its peak. Bond yields move inversely to the price.
The surge in bond yields will be of particular significance for the SA Reserve Bank, which starts a three-day policy meeting on Tuesday, under pressure to follow its developed-economy counterparts and cut interest rates.
On the other hand, the Bank will not want to act too aggressively and prompt outflows, more rand weakness and even higher borrowing costs, at a time when SA is also facing the possibility of losing its last remaining investment-grade rating.
“Eighty-percent of the move we have seen in the past few days has been a result of market panic and is not reflective of the true state of the bonds,” said Reezwana Sumad, a research analyst at Nedbank.
“While the fundamentals point to a loose monetary policy stance, I don’t know whether the Bank would panic into cutting by 50 or 100 basis points.”
The Bank said on Monday that the media briefing to announce its decision on
Thursday would take place virtually in line with the measures announced by Ramaphosa “to limit public engagements in order to mitigate the spread of Covid-19”.
SA’s first case of infection was confirmed on March 5, and in the space of less than a fortnight the number of cases has soared to 62. All of these cases have been among people who travelled outside SA, but two further cases, suspected infections due to local transmission, are under investigation, prompting Ramaphosa to impose the most stringent measures yet seen on the African continent.
He declared a national disaster, instituted an immediate ban on gatherings of more than 100 people, announced schools would close on Wednesday, and shut SA’s borders to noncitizens travelling from the hardest-hit countries, including Italy, Iran, China, South Korea, the UK, US and Spain.
Health minister Zweli Mkhize issued a stark warning on Monday, saying that the government would not hesitate to declare a state of emergency and quarantine people in specially-built facilities if SA’s Covid-19 outbreak escalated and there were sustained local transmissions.
Describing SA’s mounting number of cases as “explosive”, he said it was imperative that SA “suppress the curve” and slow the spread of the virus or the health system would buckle.
While most cases of Covid-19 are mild, 15% of patients are expected to require hospitalisation, a third of whom will need to be admitted to intensive care units, he said.
Mkhize led an extensive briefing with fellow cabinet ministers, detailing how each sector intended to implement the measures announced by Ramaphosa on Sunday.
Finance minister Tito Mboweni said funds would be made immediately available from the national disaster fund, but declined to provide a figure.
He warned of further spending cuts to government programmes, already trimmed in the February budget.
“We will need to reduce programmes throughout government ... and reduce allocated amounts so that we can shift funds to this project, which we are committed to achieve.”
He said he was discussing how to respond to Covid-19 with the Reserve Bank, and pleaded for an end to the pressure to cut interest rates.
“The SA Reserve
Bank knows its responsibilities in times of [an] epidemic … leave the conversation to me and the governor of the Reserve Bank,” he said.
Transport minister Fikile Mbalula said trains would be sanitised and random coronavirus screening would be implemented at taxi ranks.
The minibus taxi industry, which transports more than 16-million passengers a day across SA, is set to hold crisis talks on Thursday.
Trade & industry minister Ebrahim Patel said the government would ensure essential goods remained available despite the restrictions on nonessential travel and the closure of more than half of SA’s ports of entry. The government was talking to critical industries such as food producers and retailers to ensure there was no supply chain disruption and panic buying, he said.
Another emergency cut by the US Federal Reserve failed to calm global markets on Monday. European stocks dropped the most in seven years, the US S&P 500 dropped about 11% in morning trade, triggering a 15-minute trading halt, while the price of Brent crude oil sunk below $30 a barrel.