Despite all the speculation about the market’s “V-bound” pricing in a “V-shaped” economic recovery, mobility data and various surveys suggest a more protracted and uneven recuperation. This is particularly the case where South Africa remains under some form of lockdown, with the President recently announcing a new ban on alcohol sales, the closure of accommodation services for leisure purposes, as well as a nightly curfew. Lockdowns have forced reduced demand and hit household incomes and balance sheets, but behavioral change for fear of infection will also be a factor.
The various surveys run by the increasingly resource-constrained Stats SA pointed a dismal picture of household income and employment. The Old Mutual Savings and Investment Monitor (for more detail see here) showed that low-income workers bore the brunt of the lockdown restrictions, but based on the FNB/BER Consumer Confidence Index all income groups were at near record pessimism in 2Q20. Government policy has forced people to draw down their savings and cut back on consumption – more so for discretionary goods than for basic needs. Interestingly, DSTV is still a more defensive item, similar to the surveys done during the Global Financial Crisis of 2008-2009. The 2020 Coronavirus Rapid Mobile Survey (see here for the detail) shows just how dire the situation is. Retrenchments and furloughs have hit low-income workers particularly hard, while hunger has become more pervasive. The debate about the renewed closure of schools goes beyond whether children will fall behind, it is about kids being fed by the National School Nutrition Programme, and that schools are often a place of safety.
So far, ample global liquidity and an accommodative SARB have supported markets, but fundamentals suggest a bumpier ride at a time when cash is no longer the obvious king. On this basis, a balanced yet nimble approach is required to navigate the pandemic sea.
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