On 12 April, the last date for which electricity data was available, demand for electricity hit a record low for the year. On that day, demand was even lower than it was at the peak of the summer holiday season on 1 January 2020.
On 18 April, there was a marked increase in the number of confirmed cases (251). This rise may herald the expected exponential increase in confirmed infections.
The number of test conducted for COVID-19 topped 100 000 on 17 April. So far testing has risen only as fast as confirmations (see graph below). On average one in every 36 tests results in a confirmation. In order that the health facilities keep abreast of the anticipated trend, the number of tests has to grow exponentially.
Shortly after the extension of the national lock-down, statistics showed that 1) the number of new infections in the country were declining and 2) recent numbers of recoveries exceeded (confirmed) new infections. Although this situation did not last long, it invited the question - “under what conditions can the economically devastating lock-down be lifted?” (see below for the human impact of declining GDP) While the full resumption of economic activity is desperately called for, the low number of infections ensures that virtually the entire population remains susceptible to infection. As long as any member of the general public is infectious, a full lifting of the lock-down could reinitialize the pandemic.
In the absence of a vaccine, there is little justification in lifting the lock-down before there are fewer infections than when the lock-down was first initialized (i.e. when there were about one-thousand confirmed cases). A more rigorous approach would be to lift the lock-down only once no-one in the general population was infectious. Even then, uncertainty would indicate that only a partial lifting of the lock-down is likely. A partial lifting of the lock-down would allow for economic activity to resume while those in public and at work are required to wear face masks, mass events remain prohibited and international travel remains curtailed.
Ultimately, the economic constraints imposed by the lock-down, compel it being lifted before the virus is eliminated or a vaccine is developed. Balancing the humanitarian needs and the maintenance of living standards requires that health and economic needs are balanced. The balancing is achieved by lifting the lock-down constraints only to the extent that resulting increase in medical emergencies does not exceed available critical care facilities.
The greater the availability of critical care facilities, the more the constraints can be lifted. The slower the rise of infections, the more time there is to increase critical care facilities. The optimal balance between health concerns and economic interests is one is which the lock-down is alleviated only to the extent that critical care facilities are fully occupied. The more critical care facilities are available, the more the lock-down can be lifted.
It remains to be seen what happens in places like Wuhan city in Hubei province, China where a three month lock-down was lifted (and indications are that a second lock-down may be on its way). In Wuhan (and Hubei province), the number of recoveries and fatalities now matches the number of confirmed cases. Despite being at the epicentre of the pandemic, less than half of one percent of the population (50 000 of the 11-million residents) were confirmed as having the virus. This means that the vast majority of that population remains susceptible to the virus and the possibility of re-emergence of the pandemic remains. Ensuring that the pandemic does not resurface will be a testimony to state capacity in that area.
In response to the COVID-19 epidemic, the South African government declared a national state of disaster on 15 March 2020. Measures included the partial closure of borders, the closing of schools and prohibitions on events involving more than 100 people gathering.
On the 20 March 2020 South Africa reported its first fatality from COVID-19. This come as the country confirmed 1 170 cases of the virus (3 300 to date) and entered its first day of a national lock-down. The announcement of fatalities was expected - countries typically report their first fatality well before they have 200 confirmed cases. Only the Czech Republic has recorded a larger number of cases before their first fatality. Germany, the next best scenario, had recorded 1 090 cases before their first fatality. South Africa's low death toll may be a reflection of the socio-economic status of the early victims or significant information lags.
The trend in the number of confirmed cases established in March changed once the lock-down was initiated. The new trajectory was flatter than the initial trend, suggesting a change in the trajectory of the epidemic. In the initial phase, the trend followed that of the places travelers had visited. The 'reset' took place when the local pattern dominated once international travel restrictions kicked in. Until at least the 14 April 2020, the new growth trajectory was linear and did not accelerate, as is expected of epidemics. While the modest growth in cases was a relief, it also suggested that the lock-down and associated economic constraints may be prolonged.
If the new "exponential" trajectory comes to totally dominate the increase in infections in South Africa up to 12 000 confirmed cases could be anticipated by 25 April.
If the more "linear" trend continues to dominate the infection rate (as has recently been the case) the number of infections will only rise to 12 000 by 12 August.
The economic impact of COVID-19 was seen well before there was a significant number of infections. Initially, markets reacted to the global clampdown on international travel and the associated reduction in trade. South Africa's JSE fell sharply on the back of a recession in the preceding two quarters. International trading ensured that the Rand fell relative to major currencies - despite these other economies being in similar emergencies.
The lock-down, which came into effect on 27 March is sure to have a massive additional impact on the economy. However, the impact will be more evident in terms of declining household income than in crashing stock prices or exchange rates. In the context of high household debt levels, the decline in income will have an impact on household welfare well beyond this emergency. Furthermore, municipalities already in financial distress, will be among the institutions worst affected as households hold back on payments. While the impact on declining income is immediate, it may only be possible to quantify the impact several months from now.
In the absence of a real time measure of economic activity, the uptake of the means of production are a useful proxy measure. There is a strong correlation between economic activity and electricity consumption. Since the lock-down there has been a substantial decline in electricity consumption suggesting a commensurate drop in economic activity (see graph below).
Another index of the slow down in economic activity is provided by the mobility indices provided by Apple and Google. These indices show that individual mobility has decreased by approximately 80% since the lock-down was initiated. Although the index has dropped substantially more than electricity consumption both indices point to economic activity going in the same direction.
Prior to the national lock-down, share prices had already regained a significant proportion of their losses. On 28 March Moody's became the last major rating agency to downgrade South Africa's sovereign credit rating to below investment grade.
The JSE ALSI index is taken as representative of the general trend in market value. This is shown as a proportion of the highest ALSI since January.
The consumption of electricity relative to the highest level after January is illustrated on the graph below.
The extension of the lock-down was announced on the eve of Good Friday after markets had closed. When markets opened after Easter Monday, the Reserve Bank announced a (second) one percent cut in the Repo rate. Consequently, Tuesday 14 April saw a slight surge in the ALSI index and not the drop expected from a prolonged lock-down.
The combination of recession, economic stagnation and a credit downgrade, indicates that a IMF loan may well be on the cards for South Africa. While such loans are almost universally derided because conditions are sure to include politically unpalatable interventions like the trimming of the public service wage bill and protection of property rights. A political impasse in the ruling party has prevented these objectives being realized before. The conditions of a IMF loan may be precisely what is required by the President to break the current impasse and restructure the economy.
South Africa has deposits worth R74-billion with the IMF. Almost R16-billion of this can be accessed without conditions being imposed. This is less than the state's social assistance payments made over a 21 day period.
Matched time series
The epidemic has become inextricably mixed with the economic measure taken to limit fatalities (compare graphs be below). While it is not yet possible to measure the impact of COVID-19 on human welfare, the impact of the economic shock associated with the epidemic can be hypothesized. Prior to the extension of the lock-down, National Treasury had indicated that the economy will shrink by about 4% as a result of the trade and travel restrictions and the lock-down. The extension suggests that the impact will be greater.
The reduced economic activity will be associated with a similar drop in per capita GDP. A 10% drop in per capita GDP will be reflected in declining household income as well as reduced levels of health and welfare. An increase in the national Crude Death Rate (CDR) can thus be expected. Indications are that a 10% drop in per capita GDP will result in a small increase in the CDR, resulting in 25 000 extra deaths over the next year. This can be taken as a measure of the human cost of the economic counter measures.