Publications
Partners
South Africa’s benchmark stock index fell to the lowest since July 2013 after President Cyril Ramaphosa’s declaration of a national state of disaster over the coronavirus outbreak stoked investor concern about its impact on an already fragile economy.
The president announced tough measures Sunday to stem the spread of the virus locally, including halting flights and shutting schools, and said the government was finalising a crisis package.
An emergency cut in the US Federal Reserve rate, as well as those by other central banks to try to stem the impact of the virus, only accelerated the sell-off sweeping through global equities.
The FTSE/JSE Africa All-Share Index ended down 8.3% after sliding by a record 12% at the low point of Monday’s session.
“The JSE is taking cues from global markets which will also be reacting to the US Fed cut that only increased fear,” Nolwandle Mthombeni, an analyst at Mergence Investment Managers, said.
“There additionally will be some local investors worried about our economy after the president’s speech last night.”
Naspers Ltd, South Africa’s biggest stock, fell 8.6% to weigh most on the overall market, while heavyweight Richemont declined 7.9%. Just seven of the benchmark’s 160 members managed gains.
General retailers fell the most since December 2015 as concerns over the impact of the virus on spending combined with a dismal reading of consumer confidence. Gold miners at one point dropped more than 20%, the most on record, before paring declines.
“I expect there will be more negative days than positive over the next few weeks as further data comes out that confirms growth slowdown,” Mthombeni said.
Ramaphosa has endured withering criticism for failing to act decisively enough to spur economic growth and tackle graft since taking office in February 2018, inaction that’s been widely attributed to his tenuous hold over the ruling party.
Now, in the face of the onslaught of the global coronavirus pandemic, the 67-year-old Ramaphosa is finally showing the mettle he was renowned for during his tenure as a firebrand labour union leader and anti-apartheid activist in the 1980s and early 1990s.
He announced a string of drastic steps to combat the spread of the pandemic including travel bans on nationals from some of South Africa’s biggest trading partners and closest allies, including China, the UK, the US and Germany.
Other measures announced in a televised address on Sunday night could prove unpopular, such as closing of schools for a month and a ban all public gatherings of more than 100 people.
Ramaphosa briefed senior leaders of the ANC on his action plan earlier Sunday, and encountered opposition from several who regarded them as too harsh, according to three people who attended the meeting and spoke on condition of anonymity.
The president prevailed after explaining the potentially devastating impact of a widespread virus outbreak in the country’s overcrowded townships, where a high prevalence of HIV/Aids and tuberculosis may render residents especially vulnerable, they said.
The ANC caucus in Parliament, which includes some of the president’s biggest foes, welcomed his “bold and decisive intervention,” as did the country’s main business lobby group and most opposition parties – the latter are typically strident in their criticism of much of the government’s actions.
South Africa has confirmed 62 coronavirus cases since March 5, and moved swiftly to quarantine those infected and track down people who came into close contact with them.
– Bloomberg
