A lot of things in life have a binary outcome. It is either black or white; you either win or you lose; it is either a boy or a girl; etc. But, depending on your outlook on life, most things can have a subtly different hue of the absolute. Currently we are experiencing something that humanity has not experienced for a very long time, and for most of the people alive today, never. A pandemic as alarming as Covid-19 is, however, not the first crisis the world has dealt with. But it is one that affects both people’s health and the economy.
Just over a decade ago we had a frightening financial meltdown and the general consensus was that capitalism would never recover and our lives would be changed forever. Those negative sentiments turned out to be totally wrong and we emerged stronger than ever; with stricter regulations on financial institutions and only the quality companies surviving. A kind of natural selection, as it were.
In 1939 the Second World War started. It was, once again, a man-made catastrophe which levelled many cities in Europe. Millions of people lost everything and economies were destroyed. It did, however, result in the establishment of the United Nations, the Universal Declaration of Human Rights, and an understanding of how devastating and futile war can be. The world recovered and thrived over the next eighty years.
With Covid-19 we have to deal with a crisis on two fronts. On the one side we are trying to save lives by preventing the spread of the virus through human contact. By doing this, however, we are shutting down the economy and livelihood of millions of people, resulting in the second dilemma. As far as saving lives is concerned, it seems we will not be able to stop the spread of the virus, all we can do is to slow it down so that our health services can cope with caring for people who do get very sick.
In South Africa we have been reasonably successful in doing that, according to Professor Salim Karim. He does, however, point out that there will not be an effective vaccine until the beginning of 2021 and it is impossible to continue with a total lockdown until then, because of the economic impact on people’s lives. We can, therefore, expect to see the spread of Covid-19 continue and even escalate. We do know, however, that there will be a vaccine in future and herd immunity will develop. We will also be better prepared for a similar pandemic in the future.
The positives we can already see evolving from this crisis is the acceptance of remote interaction. There are some private schools using Google classrooms to carry on with their lessons; companies are having meetings via Zoom; and people are ordering their groceries and meals online for delivery. All of these initiatives will carry on into the future after Covid-19, hopefully resulting in a world with fewer cars on the road and an increase in productivity due to saving time previously wasted on travel.
State departments are upgrading their systems to deal with things like applications for IDs, passports and driver’s licences online. In South Africa it seems that bankrupt state-owned enterprises like SAA will finally be allowed to disappear and increases in the ballooning state wage bill will be addressed.
As with most things involving people, and especially in a country like South Africa, there is an expiry date on how long government can dictate how people should live. We are already seeing looting at grocery and liquor stores and the black market in cigarettes and alcohol is booming. After 21 days of lockdown people are becoming desperate and to spend another two weeks in lockdown while we know the virus cannot really be contained, will mostly result in a decision to rather take your chances out there than to commit financial suicide sitting at home. So we hope government will understand this and commence a gradual re-opening of the economy. This should create a sense of optimism which should be reflected in the valuations of your investments, which have been written down unfairly in most cases.