The world is changing fast and to keep up you need local knowledge with global context.
Episode three of Biznews’s Inside Covid-19 podcast is twice as long as usual as we look back on the momentous lockdown announcement. Jonny Broomberg paints the global picture, highlighting why South African president Cyril Ramaphosa is receiving so many plaudits for Monday night’s announcement of a complete lockdown – and why, from an economic perspective, it took so much courage.
A couple of entrepreneurs follow him, with Bernard Swanepoel, wearing his Small Business Institute hat, and then Marc Wachsberger, founding CEO of The Capital, shares how he has adjusted the business to offset the impact of a virus that has laid much of the tourism and hospitality sector to waste.
We also hear from experienced money manager Sam Houlie of RECM Counterpoint who explains why he’s spoilt for choice right now, and hasn’t been this eager to buy shares since the Global Financial Crisis. Closing off this episode we hear how the super wealthy are handling the obvious threat of the Covid Crisis to the property sector where many are heavily invested. – Alec Hogg
Welcome to Jonny Broomberg the chief executive of Vitality Health International. Most people in South Africa would know you as running Discovery Health here in this country, how’s the new world going?
It’s been very interesting. It is a particularly interesting time now with this pandemic that the world is facing. As you probably know, Discovery operates health insurance businesses in other parts of the world, the UK, China, Australia and the US. That is my new portfolio, trying to share the learnings and best practice from the countries where we are large and successful to the startup and trying to break in.
You have a relationship with Generali, who’s a big Italian company so clearly you’ve been watching not just because of the disaster that’s going on in Italy but perhaps also from a business perspective. What are you making of all that?
I think Italy is particularly hard hit but it’s now really becoming a global issue and we are seeing that each country is just on a different part of the trajectory. You’re already seeing news today that the mortality rate in New York could be exceeding that of the worst parts of Italy in the next few days.
It’s not an Italian problem per se, we just know a lot about that one. We are not involved in health insurance with Generali, at this point, we are partners with them from a life insurance point of view.
The story about New York is a bit concerning what’s going on there?
There are a number of factors that are at play here, things are moving so fast that I don’t think anybody could confidently tell you that they know the whole story. What you’ve got is firstly the demographics in those parts of Italy, the average age is significantly older than the rest of the population, New York also has quite an elderly population.
There’s some talk in the Italian situation that the strain of the virus there is a more virulent one than say in South Korea. Then of course there’s the response of the government and the system. In the US they acted quite late in terms of a complete shutdown so the virus was allowed several weeks to spread in the community before the lockdown. Once that starts happening it’s just a matter of time before somewhere between 5% and 10% of people end up with serious illness and a subset of those inevitably die particularly if they’re older or have serious underlying medical conditions. A lot of it is to do with the timing at which governments are moving into suppression of the spread. We are fortunate that it arrived in South Africa relatively late. We still have very little spread inside the community, in other words the number of infections where there’s no travel history is still quite small and the government, all credit to the president and the Minister of Health and others have moved decisively into this lockdown and there is decent chance that we will be able to flatten this curve more effectively.
What does it mean to flatten the curve? We hear the comment often, indeed we even heard it in the comment from the president last night.
If you think about a normal distribution curve where you have a Y axis, that’s the number of cases. The horizontal axis at the bottom is time. If you leave this virus unchecked it spreads through the community and you get a very high peak, very early. Within a few weeks there is a huge peak of infections, then it starts to drop off because the whole population becomes infected. So have that picture in your mind of a very thin high peak on a graph. By suppressing economic activity and population activity you stop the transmission of the virus. So the peak is much lower and spreads out over a much longer period, flattening the curve. Why do governments want to do that? There are some very compelling reasons because there is a huge cost from an economic point of view. It’s a terribly hard decision for a government to make, But the reason for it is very clear. The first is you buy time to get the health system ready to deal with the very large number of cases that would emerge too quickly if you didn’t try and flatten the curve. You would get a huge number of sick people flooding the hospitals, or hospitals being overrun They can’t treat the people and then a higher number of deaths. If you can flatten that curve and push it out, you buy time and we’ve been lucky enough that both our public and private sector systems have had time and they’re getting ready to deal with the load. That’s one very big reason of course. Also every day that goes by there’s progress on potential drugs to treat. There are a few emerging that look favourable every day that goes by, we get closer to a vaccine.
It did appear as though at least at one point, the UK were using something that they referred to as infecting the herd. There’s this short sharp picture that you drew for us right in the beginning. What were they trying to achieve there?
There’s a very well-known concept in virology, it clearly establishes that at a certain point when enough of the population has been infected, and because after any viral infection the human body develops immunity and a mass of the population have immunity, the virus can no longer survive because it needs a certain number of infections to keep moving from one person to another, it eventually dies out. That’s what happened to smallpox. That’s why measles almost doesn’t exist when most kids get vaccinated. That is called herd immunity and it’s typically around 60% to 80% of the population have been exposed to the virus depending on the virus, the virus literally can’t function anymore then it disappears.
Johnson’s government had been advised to take the pain in the short term and then there would be herd immunity and the virus would die out. What they didn’t take into account was that the estimates eventually emerged from a model at Imperial College that said that the cost of that in the UK would probably be half a million lives. Nobody could really contest that, so the government had to face up to the fact that, yes, herd immunity would work and keep the economy going but at a huge cost in human life. In the US for the same would be 2.2 million lives.
I was going to touch on that 2.2 million, up to that point it was almost as though the US was wilfully not applying the measures that had been applied elsewhere. I suppose it’s all speculative now, but certainly the White House initially saying it was fake news and secondly dismissing the Covid-19 as being something that wasn’t really that serious. It’s taken them a long time to wake up to how scary this is. I presume that the Imperial College study did it.
It may have, as well as the rising number of cases in the big US cities and the deaths made it too obvious to ignore. There still isn’t a federal call for a lockdown. Not all states are under lockdown in the US. Following the news, President Trump is mattering about lifting the lockdown because he’s clearly worried about the economy and about his re-election prospects. The state governments in the cities know that they can not afford to lift the lockdown. You can see in China or South Korea, when you do it very effectively you literally suppress the virus and they’re now slowly starting to let people go back to work, obviously still very cautiously. There will probably be second and third waves of infection but they can then act on those very quickly. Meanwhile there systems are ready to deal with it and they have restored confidence in the economy. So it was a short, sharp but very effective action.
The infections are going down, why would that be?
The infections go down because there’s no opportunity to spread, this infection jumps from person to person through proximity. If you’re hanging around in a crowd and you are infected and you sneeze, or you touch a surface then every other person who touches that surface gets infected. If people are in their houses and if all people who are infected are separated from everybody else, eventually it does. It stops spreading. So you’ve seen recently in China now there’s almost no local infections. The only ones that they’re counting daily are imported from travellers coming in. So it’s stopped spreading inside the population because the population stopped mixing with each other. As I said before that has catastrophic economic consequences that governments are faced with, it is a tremendous balancing act of when do we restart our economy versus keep the virus under control.
Those second and third waves that you spoke about?
It’s all speculation, no one’s seen one yet but they are expected to. You could imagine theoretically in say Wuhan or anywhere in China that once people start going back to work and into offices, you just need one person infected, you’ll start getting more spread. At this point a lot of people you know have immunity because they were infected and the health system and societies are geared. I would imagine the minute the authorities saw a cluster or spread in a part of a city they would lock it down again. It buys time for all of society to get ready, compare that to the absolute kind of crisis mode of say the Lombardy region of Italy, Spain, UK and New York to some extent where it’s just panic stations because the hospitals are overrun and the systems aren’t in place to manage the volume of care that’s needed.
From everything you’ve said it appears as though in South Africa our government has handled this pretty well?
I definitely think they have. I think they’ve been courageous. We have less firepower as an economy to back the economy compared to say China or the US or Europe where we just don’t have the fiscal resources, the economic cost here is going to be greater than in other countries. We started off on the back foot, the lockdown is a brave decision for our government and for others. It was also taken quickly and decisively. A lot depends on how our population responds to this lockdown and leaders in the society need to appeal profoundly to every citizen to really take this incredibly seriously. People need to stay at home, leave only for the most essential errands and not interact with too many other people. We tend to be a society that can be a bit ungovernable and a bit disrespectful of the law. If that happens, our government’s good actions will be to no avail. We’ve had the blessing of time because it did arrive here later than North America and Europe. We’ve had summer which has slowed the spread. We’ve had some luck on our side but we’ve also had decisive action.
To end off with, what about the medication? Is there any good news that’s emerging now presumably China has been at this or attacking this?
China has been at it, the US scientific community and Europeans are all over it too. Typically a drug to be tested for safety and efficacy is a 10-plus year exercise. This is all happening in real time. There are some glimpses of positive news about this drug chloroquine, it’s a very old malaria drug. It’s not yet definitive, there’s early evidence that it may be effective against this virus and it’s being used selectively. Nobody should take this except under strict medical supervision. It has significant side effects that should only be used for ill patients in hospital. There are some anti-viral treatments that have been used to treat HIV that are being trialled and a number of other things in the works.
In the clinical stories that are coming out of Nigeria where there have been people dying because they’ve taken it without any supervision. It is pretty dangerous.
Yes, there’s a story in The New York Times today about a man from Arizona and his wife who drank an agent that’s used to clean fish tanks that has chloroquine in it, this man died and his wife’s in critical condition. It must only be taken under doctor’s orders.
So you’ve given us a good outline here. South Africa has had the blessing of time and decisive moves by government, as things stand right now when will we know that these measures are succeeding?
That’s a hard question to answer. I think it’s a week-by-week thing. Over the next two to four weeks we’ll be able to tell whether the curve that we’re following looks like either the very best of the curves we’ve seen over time like South Korea or the very worst of the curves like the Lombardy region of Italy or possibly New York now. I’m hoping we’re close to South Korea, which is a slow flat curve. Time will tell, the case numbers have been going up quickly as you know the human mind struggles with this notion of exponential increases, we are in that phase now but it’s still small. We’ve been doing a lot more testing earlier in the process, than some other countries. That’s why our numbers look relatively high compared to say Spain or Italy three weeks in.
What about the idea of isolating the elderly or the vulnerable people and letting the rest get back to work and get on with it?
I suppose I’ve never heard that put forward as a policy. Protecting the elderly and those with other vulnerable vulnerabilities is critical because there is a much higher mortality rate among those who are in their 70s and 80s. The young are not immune from serious disease. Although it’s a small minority but there have been people and 50 and under 40s and in all countries of the world who got severely ill and died. The young and the healthy end up mixing with the elderly too. I don’t think that’s an accepted public health measure. It’s an interesting one. I haven’t really given it much thought. So I don’t have a lot of educated responses to it.
Cyril Ramaphosa: The Audio Biography
Listen to the story of Cyril Ramaphosa's rise to presidential power, narrated by our very own Alec Hogg.