OPINION | Reaching herd immunity will allow government to shift its focus back to its policy reform agenda

07 October 2021 - 11:56 By Ndivhuho Netshitenzhe
Without policy reforms, SA will be stuck in a low-growth environment, even when Covid-19 becomes a thing of the past, says economist Ndivhuho Netshitenzhe.
Without policy reforms, SA will be stuck in a low-growth environment, even when Covid-19 becomes a thing of the past, says economist Ndivhuho Netshitenzhe.
Image: Stanlib

SA’s Covid-19 vaccine rollout has been slow. At the beginning of the rollout programme, the country faced significant supply issues, failing to timeously secure sufficient doses. Once supplies started trickling in from February, vaccine distribution and delivery strategies were flawed.

Given these and other challenges, the government has had to revise its target for reaching herd immunity (fully inoculating about 40-million South African adults) from December to March 2022. Positively, the country has subsequently made much better progress in distributing the vaccine around the country, increasing the daily vaccinations from a mere 5,500 at the end of April to a daily peak of more than 260,000 in July.

Unfortunately, this momentum has subsided since July, emphasising the government's need to improve communication concerning the safety of the vaccines and limit vaccine hesitancy within the population. Reaching the target of vaccinating 300,000 people per day and bringing forward, as much as possible, the herd immunity goal would deliver many significant benefits for the country. These benefits fall under three main headings: health and wellbeing, livelihoods, and broader economic benefits.

By the end of September SA had administered more than over 17.5-million vaccines in total, representing almost 30% of the total population, with more than 14% of the population being fully vaccinated.

Vaccinate for better health

Research has shown that Covid-19 vaccines help to reduce the spread of the virus between people, making it relatively less contagious.

As the world makes significant strides towards herd immunity, it may limit the emergence of other, more serious, waves of Covid-19. In addition, faster vaccination drives reduce the risk that more contagious variants (like Delta) and possibly more deadly ones will develop. It will also limit the psychological impact resulting from this pandemic.

Unfortunately, vaccination does not fully protect people from becoming infected, so the distribution of the various vaccines will not eliminate the virus completely. Most countries will have to introduce a booster vaccine for the more vulnerable portion of their populations, possibly on an annual basis.

There is clear evidence that all vaccine types and brands help to protect against becoming severely sick, with some even protecting from mild sickness. This should help to ease the pressure on the healthcare system, and free up hospital capacity, for patients in need of treatment for other conditions.

Recent developments in the UK provide proof. Hospitalisation rates have remained well contained, with low levels of new deaths from the virus, despite a rise in Covid-19 cases since May, in a population where 60% of adults are fully vaccinated.

In contrast, hospitalisations and death rates in SA spiked in the third wave. With the third wave now officially behind us, SA needs to ramp up the vaccine rollout ahead of the inevitable fourth wave, which would prevent it from becoming deadlier than the third.

Eventually, the hope is that, with herd immunity, Covid-19 will eventually be seen as a severe flu, rather than something that requires significant social and economic interventions.

Vaccinate for better livelihoods

It goes without saying that the Covid-19 pandemic has significantly affected people’s livelihoods and plunged millions into poverty. Various lockdown measures in SA since March 2020 have caused significant job losses and other income shocks.

During the worst of the lockdowns last year, 2.2-million people lost their jobs, with millions falling into poverty. Informal economy workers have been particularly vulnerable, because the majority lack social protection and have lost access to productive assets.

Without the means to earn an income during lockdowns, many are unable to feed themselves and their families.

While the government’s efforts to minimise the impact of lockdown measure on business, households and their incomes are welcomed, these support measures have been brief and insufficient. This is despite additional waves and ongoing lockdown measures well into 2021. This has left many individuals and businesses more vulnerable than ever at a time when other countries, which have fast-tracked vaccine rollouts, are reopening their economies.

Unfortunately, women have been disproportionately affected by the pandemic. Not only have they lost more jobs than men (with 14.7% of women losing their jobs compared with 12.8% of men), they remain underrepresented in the Covid-specific government income support programmes provided for unemployed and furloughed workers.

According to Nids-Cram surveys, only around 35%-39% of the UIF-Ters beneficiaries or the Covid-19 grant recipients were women. The time that women spend on childcare was found to be relatively more responsive to school closures and re-openings than the time men spend on childcare. Far more women than men cite childcare responsibilities as a constraint on their labour market activities.

Despite some easing of lockdown measures compared to last year, SA’s labour market remains extremely weak. The high levels of uncertainty surrounding further waves of Covid-19 and lockdowns has undermined employers’ willingness to hire back the people who lost their jobs during the initial lockdown phase. The number of employed is still 1.44-million below the level of employment at the end of 2019 (before Covid-19).

A more effective distribution of vaccines is clearly an important solution in reversing the effects of the pandemic on people’s livelihoods. It would be particularly beneficial in enabling women to return to the labour market. It appears unlikely that SA’s labour market will recover fully until the country has reached the population herd immunity – which at this stage is likely to be achieved only in the first half of 2022.

Vaccinate for broader positive economic impact

The sooner the government rolls out the vaccine, the sooner the economy can open up and activity can normalise. Many of the economic benefits SA stands to gain after successful vaccination are already being experienced by a number of major economies, including the US, UK and parts of Europe.

First, it will increase activity in service sector industries, the most negatively affected area of the economy. In particular, leisure and hospitality, entertainment, restaurants/bars/ clubs and travel. While the South African government has endeavoured to minimise the economic impact of the various restrictions, large portions of the economy have been unable to function effectively for more than a year. For example, international tourism, where the emergence of the Beta variant resulted in warnings against travelling to SA from countries such as Germany and the UK.

The US has already enjoyed service sector improvements. The number of passengers using their airports on a daily basis fell from an average of about 2.3-million before Covid-19 to a low of about 100,000 a day during the height of the Covid-19 lockdown.

After the increased distribution of the various vaccines, that number has increased to about 2-million now. There has been a noticeable surge in airline travel during the second quarter of 2021, as the proportion of people who are fully vaccinated approaches 60%.

While many industries have been able to remain open throughout the crisis, many individual businesses have introduced their own internal restrictions to limit the spread of the virus. In many instances, these restrictions have impinged the overall performance of the business. For example, in the mining sector, changing operating practices such as social distancing, screening, testing and closing mine shafts if there is a Covid-19 outbreak have added to cost pressures.

Consequently, the productivity of the business sector would benefit significantly from a substantial increase in the number of people vaccinated, especially if that resulted in the country reaching some form of population immunity.

Critically, while many businesses have managed to adapt to the impact of Covid-19, the increased level of uncertainty has undermined both business and consumer confidence. This increased level of uncertainty has also meant that fixed investment spending, especially on machinery and equipment, transport equipment or technology upgrades, has been put on hold.

Another benefit of increased vaccination rates is an increase in tax revenue, with a substantial reopening of the economy, greater shopping centre activity, which would boost retail sales, and more consistency in the provision of education, especially at a school level – all of which benefit economic performance.

In addition, vaccinating the population has the potential to ease the social tensions related to the extended lockdown measures in the country.

Finally, and probably most importantly, reaching herd immunity through vaccinating South Africans will allow government to shift its focus from managing the pandemic back towards its policy reform agenda. The pandemic has further slowed the already sluggish reform process.

In short

A more aggressive vaccine rollout in SA will ease government’s dilemma between saving lives and preserving livelihoods and allow it to focus on ensuring that economic recovery remains on track.

A faster vaccine rollout is already proving to be beneficial from both a health and economic perspective for many countries around the world.

However, reaching herd immunity is not a silver bullet to resolve the country’s socio-economic ills.

High unemployment (especially among the youth), rampant inequality, rising poverty and a lack of sustainable economic development remain structural issues in the country. These issues require government to implement appropriate reforms and investment-friendly policies.

Aside from a few welcome regulatory reforms related to electricity, SAA and ports, the government in general has been slow in implementing the structural reforms and policies needed for long-term socioeconomic prosperity. Without these reforms, SA will be stuck in a low-growth environment, even when Covid-19 becomes a thing of the past.

  •  Ndivhuho Netshitenzhe is an economist at Stanlib Asset Management

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