News in South Africa 20th December:
1. Travel hindered by Omicron:
With Covid-19 cases on the rise in many parts of the world and the new Omicron variant spreading quickly, holiday travel suddenly seems a lot more complicated than it did a few months ago.
The good news is that early data suggest vaccines still provide good protection. While initial evidence indicates that Omicron may be more contagious and better adept at evading vaccines, it so far appears unlikely to cause severe disease among people who are vaccinated.
The less-good news is that there’s little real-world data about the highly mutated variant. That not only makes the true risks of Omicron hard to assess, but it has also made international holiday travel more difficult: Many nations have implemented new travel restrictions to contain the strain, creating a confusing patchwork of rules and regulations.
So with Christmas less than a week away, what does all this mean for people travelling to see family and loved ones?
Experts offer their opinions below:
What is the risk of holiday travel right now? – Jessica Justman, Columbia University Medical Center epidemiologist
The current situation with Omicron is moving fast, and data from many places, including the U.S. and South Africa, look concerning. The critical indicators are going to be trends in hospitalisations and deaths as well as hospital capacity and percent positivity.
As for the specifics, I think it’s possible to go through an airport safely by wearing a well-fitted mask, even double-masking, and maintaining distance from others as much as possible when going through security or boarding the plane. If you have been going grocery shopping in the supermarket, then the risk in an airport is not likely to be that different. If you are someone who has not been vaccinated and does not wear masks, then supermarkets and airports are going to be risky. If you are vaccinated and boosted and wear a mask most of the time, you should be OK.
How should people be handling holiday travel this year? – William Schaffner, Vanderbilt University epidemiologist
They should hang their stockings with care. One of the ground rules I would suggest is that you’re entitled to come to the celebration if you are vaccinated and boosted. But if Uncle Frank, as much as we love him, is not vaccinated, we have to tell him he can’t join. We’ll Facetime him, but he’ll have to unwrap his presents by himself. If you’re doing any kind of group activity—worship, a party—wear your mask. We have to go back to social distancing and really reconsider indoor gatherings. It’s better to rent a movie than go to the movies. And rapid-test the day before you all get together. If everyone is negative, that just adds another level of confidence.
What’s your advice for people who are thinking about changing their travel plans? – Monica Gandhi, infectious disease expert at the University of California, San Francisco
I just think we’re in a super different place than we were in last year. There is a new variant, and I know people are panicking. But if you are vaccinated, we have to trust the power of the vaccines. Get a booster and go on your way. Wear masks on a plane and in other crowded spaces, but otherwise enjoy your holiday.
Omicron is more transmissible. That’s definitive. But infections also seem more mild, whether that’s because of the variant or population. There seems to be less antibody response, but B-cell and T-cell immunity seem to be working just fine. Those three things to me do not suggest anyone needs to be canceling travel plans.
What’s your advice for people reconsidering holiday travel? – Emanuel Goldman, Rutgers University microbiologist
My thinking is at the point that no one should change plans, but we may need to add masking to our plans. The early reports indicate if you are vaccinated with a booster, that still offers good protection. So at this point, I wouldn’t change travel plans, but I would make sure to mask up in public places. If you’re vaccinated, planes, trains and taxis are fine as long as you’re careful with your masking. If you’re unvaccinated and you don’t want to catch Covid, you’ll want to be very careful. There’s a lot we still don’t know about it.
2. Fitch upgrades rating:
Fitch Ratings has upgraded five South African banks’ Long-Term Ratings to AA+ with a stable outlook.
The five banks are Absa, Investec, Nedbank, Standard Bank and FNB.
This reflects an improvement in their creditworthiness relative to the best credits in the country.
Fitch says the banks have significant headroom to withstand current pressures.
It also says their profiles, management, and strategy, and risk appetite remain strong.
The rating agency says the banks’ ratings could be upgraded further if they continue with their strong performance.
Debt ratings have also been upgraded by one notch.
3. Mass JSE delistings:
By the time most of white-collar South Africa returns to work in January, Adapt IT will no longer be listed on the JSE.
The takeover by Canada’s Volaris will be implemented on January 3, and shares will be delisted the day after. By that time, Tower Property Fund shares will have already disappeared from the bourse, with the R1.3 billion buyout by Botswana’s RDC Properties effective in the last week of the year.
While there are three large-cap offers underway – Standard Bank buying out minorities in Liberty, DPWorld’s proposed acquisition of Imperial Logistics, and Heinken’s tilt at Distell – a recommended cash offer announced at the end of November will see little-known Vivo Energy be delisted from the JSE.
Earlier this month, ARB Holdings with a market cap of R1.8 billion said it had “received a non-binding expression of interest … for all the issued shares in ARB excluding those held by the current controlling shareholder and its associates”.
There are no further details at this stage, but given that the founder (Alan Burke) controls 62% of the company, it is likely that the family – or associates thereof – want to take the company private.
Niche financial services business NVest Financial Holdings has announced that it received a proposal from a consortium comprising its three largest shareholders to acquire all the shares they don’t already own. The three trusts own 64% of the company.
“It was also anticipated that the listing would help increase the liquidity of the shares of the Company and enable an effective staff incentive scheme.”
For smaller Spanjaard, the reasons for it making an offer to minority shareholders are similar. It says the “primary rationale … is to delist Spanjaard and provide the company with the flexibility required to do transactions, including BEE transactions, without the requirements of a circular due to the low market capitalisation of the company, which introduces substantial delays and costs associated therewith”.
Long4Life, which has received a R4 billion approach from Old Mutual Private Equity, will also disappear from the market in the first half of next year. The company is yet to publish a circular.
One can add to this Bell Equipment, at which the founding family will surely make another approach, following its inability to prove the previous offer was fair and reasonable.
Ascendis Health reminded the market last week that “the board is considering whether Ascendis Health should remain a listed entity”. The business is far smaller after its recapitalisation, plus it highlights “the costs associated with being listed and the limited availability of capital for growth”.
Beyond these two, Heriot Reit (real estate investment trust) and Safari are plodding towards a merger, while Irongate Group (previously Investec Australia Property Fund) continues to receive approaches from 360 Capital (and its Reit structure).
And, of course, either Impala Platinum or Northam Platinum are going to win the battle for Royal Bafokeng Platinum, which will see RBPlats disappear from the market.
4. Medical aid rules and infections:
If you get Covid-19 in South Africa as a beneficiary of a medical scheme, your insurance must cover the cost of your diagnosis and treatment under prescribed minimum benefit rules, regardless of how basic or fancy your medical aid is. That includes “medication prescribed by the doctor for managing Covid-19 symptoms”.
But if your doctor prescribes zinc, Vitamin D, Vitamin C, or another supplement – as many do – you are likely to see your medical aid claim rejected, even from a medical scheme that previously paid for such supplements in Covid-19 cases.
Such supplements made their way onto some of the lists of medications some schemes explicitly covered in cases of Covid-19. That used to be true for the country’s biggest medical scheme, Discovery, too.
“Claims for Vitamins C, D and Zinc have been funded from the WHO Covid-19 benefit for all members with a confirmed Covid-19 infection in line with local clinical protocols and guidelines and the scheme’s medicine formularies,” said Discovery, in answer to questions from Business Insider South Africa.
The WHO benefit is named for outbreaks monitored by the World Health Organisation, and as of August this year Discovery listed three types of zinc tablets, and one type of zinc capsule, covered by it – plus ten other Vitamin and mineral preparations fully paid for, with similar medications covered at the same price as those listed by name.
But in September, the national department of health published its rapid review of zinc in the context of Covid-19.
“The evidence of efficacy and safety is very uncertain at this point,” said the review committee, in recommending that zinc not be given to Covid-19 patients. “Studies were underpowered to detect clinically relevant outcomes or improvement in clinical outcomes; and there is an uncertain risk of serious adverse effects.”
That kind of finding has seen Discovery change its approach.
“As the latest evidence has shown no clinical benefit in the treatment of Covid-19 infection using these vitamins and minerals, national rapid reviews including local clinical protocols no longer recommend routine use of these items,” it told Business Insider this week. “The scheme’s Covid-19 medicine benefit has been reviewed to align with these latest developments.”
South Africa is not alone in having rejected the use of supplements.
5. How much South Africans owe:
TransUnion has published the findings of its Q3 2021 South Africa Industry Insights Report, showing how much consumers owe on their credit cards as we head into the festive season.
The consumer credit reporting agency said that with unemployment still at record levels, and consumer price inflation above average household income growth, the pressure on South African finances remains, and is clear in the latest consumer credit data.
The report shows a number of emerging trends that highlight differences in credit behaviours by consumer generations as well as divergent performance across product categories.
Although credit card originations fell YoY in the latest quarter (-23.5% in Q2 2021), outstanding credit card balances continued to grow, up 14.4% YoY in Q3 2021, TransUnion pointed out.
“Throughout the pandemic, South African consumers have relied on credit cards for both the utility they provide, particularly in facilitating the growth in online transactions, and to access a flexible source of credit to meet household bills when finances are under pressure.”
While YoY originations increased in most categories, the consumer credit market in South Africa is still below pre-pandemic levels, the credit agency said. This is particularly true in the unsecured lending space (credit cards and personal loans), where the origination volumes are between 10%-41% lower than their Q2 2019 levels.
Lenders continue to impose restrictive credit lending policies due to economic uncertainty, TransUnion said.
Credit card providers still prioritise extending credit to existing customers rather than onboarding new clients. Average balances increased by 16.8% over the period and total credit limits increased by 18.9%.
The new account credit line increased by 11.1%.
TransUnion said that outstanding balances for credit cards (up 14.4% YoY) are mainly due to consumers needing to supplement income negatively impacted by the pandemic to maintain liquidity and finance immediate household needs.
In terms of outstanding balances, there’s a disparity in the distribution of increases. The current trend suggests younger generations are increasing their outstanding credit card balances faster than older generations.
The Q3 2021 YoY change for Millennials (born 1980–1994) and Gen Z (born 1995–1980) was 11% and 12%, respectively, compared to 9% for Gen X (1965–1979) and only 6% for Baby Boomers (born 1946–1964). The convenience of a credit card is becoming increasingly important for younger generations as they transact more online.
Serious delinquencies (more than three months of missed payments) on credit card accounts have increased by 120 bp to 13.4%, the highest level since the first quarter of 2018 (13.9%). The increase in the delinquency rate reverses the progress made since Q2 2020 (12.8%). For the past four quarters, delinquency rates have remained around 12%.