The increased poverty and hardship caused by South Africa’s lockdown will lead to significantly more deaths than just the coronavirus, says chief economist at the Efficient Group Dawie Roodt.
In a research note to clients, Roodt said that the country’s current economic data shows that the income of the average South African will fall, likely by about 10%.
However, he noted that this is just one data point in a list of worrying estimates that South Africa is currently facing, including:
- A GDP contraction of around 7%;
- State revenue under-collection of approximately R200 to R300bn below budget;
- State debt to exceed 80% of GDP in two years;
- More than one million jobs lost;
- More social and political tension;
- A drop in life expectancy.
“Despite these real and dire possibilities, some people still argue that heartless economists choose ‘money’ before lives. This is not true. A healthy economy shelters healthy citizens. The health of a country equates to the wealth of a national economy,” Roodt said.
“What the lockdown is currently doing, is to intentionally undermine the economy, obviously in the belief that it will lower or limit the number of lives lost to Covid-19, as opposed to the number of lives lost as a result of increased poverty.”
Roodt said that if more lives are lost to Covid-19 than to an increase in poverty, the lockdown might be justified. However, he noted that that the disease will spread after the lockdown, leaving the country with an increased death toll due to poverty.
“If ‘ too many’ lives are lost to poverty as a result of the economic impact of the lockdown, the solution is glaringly obvious: lift the lockdown,” he said.
What the numbers say
“I am admittedly no health expert or virologist, but as I understand it, the coronavirus can, in exceptional cases, kill up to 10% of those infected,” Roodt said.
“Without getting embroiled in that debate, it seems to me that a more likely mortality rate is, in fact, less than 1% of those confirmed to be infected. But for arguments sake, let’s go with a 1% mortality rate, and let’s assume that all South Africans get infected this year.”
Roodt said that a simple calculation shows that a 1% mortality rate out of a population of around 60 million amounts to 600,000 people (assuming everyone in South Africa contracts Covid-19).
In fact, a more realistic worst-case scenario is approximately 300,000 deaths, he said.
“It follows that whatever we do in terms of locking down the economy, the price in terms of deaths due to an increase in poverty must be less than 600,000 for the lockdown to make sense, or rather 300,000 or even much less to be more realistic.”
For comparison purposes, Roodt looked at Greece after the 2008 financial crisis, and how the country’s increased poverty affected life expectancy.
He noted that for the 10 years from 2009 to 2018, the average GDP per capita in Greece amounted to $23,947 – a decrease of more than 20% compared to the peak in 2007.
He added that from 1999 to 2008, Greece saw a stable average of 9.6 deaths per 1 000. This figure increased to a peak of 11.6 in 2017 and an average of 10.6 for the period 2009 to 2018; an increase of 1 per 1,000 compared to the previous ten years.
“In 2017 the country experienced two more deaths per 1,000 compared to the average of 1999 to 2008,” he said.
“Crunching the relevant numbers from these periods reveals that on average GDP per capita fell by 20.3% compared to the previous ten years after the 2008 crisis, while deaths per 1,000 increased by one over the same period.
“This means that for every 20% fall in GDP, deaths per 1,000 increased by approximately one.”
Assuming this ratio will remain the same, a 10% fall in GDP will therefore result in an increase of 0.5 persons per 1,000, Roodt said.
He added that applying this figure directly to South Africa shows that the lockdown may not be worthwhile.
“If the average GDP falls by 10% in 2020, a very likely scenario, deaths per 1,000 will increase by 0.5 persons. Our current deaths per 1,000 rate (2018) is 9.4, which will increase to approximately ten deaths per 1,000, an increase of more or less 30,000 per annum.
“Against this background, we can expect 300,000 more people to die over the next 10 years because of an increase in poverty.”
Not an option
Based on these rough projections, Roodt said that South Africa’s options are grim:
- Lockdown the economy and kill 300,000 people over time due to the rise in the poverty rate, or
- Don’t lockdown and potentially kill a maximum of 600,000 people if all South Africans get the virus in a short period of time, at a mortality rate of 1%.
“Unfortunately, it’s not an either/or choice; people will die of the virus whether we lockdown or not. In fact, some analysts reckon that everybody will eventually get the virus, and some will die,” he said.
He added that the total number of South Africans that will die over the next 10 years could be more than 300,000 killed by poverty, plus the number that will die from the virus, despite all efforts to limit or contain the spread.
“That many people will die from the virus is a given. Locking down the economy will simply serve to increase the number of poverty-related deaths,” he said.