Rob Rose Editor: Financial Mail
A nurse prepares a measles vaccine shot. Picture: JOHANNES EISELE/AFP
A nurse prepares a measles vaccine shot. Picture: JOHANNES EISELE/AFP

The Covid-19 outbreak, if history is any solace and if President Cyril Ramaphosa’s lockdown gets traction, will hopefully begin ebbing within a few weeks. In that (best case) scenario, we will emerge from our houses to see a devastated economy. With SA’s economy estimated to be set for a 23.5% contraction in the second quarter and a number of our 2.3-million small businesses on their knees, you can expect unemployment — already at 38% — to have soared to an even more frightening level.

Nor, in fact, are we entirely clear what a "post-corona" economy will look like. In terms of post-pandemic economies, we have the example of the 1918 Spanish flu, which swept through SA like a biblical plague, killing 300,000 people within two months, roughly 4.3% of the 6.8-million population at the time.

As I discussed in this column last week, University of Cape Town professor emeritus Howard Phillips is the expert on that outbreak, having written a 535-page thesis and two books on the subject. "For years after 1918, the economy was deeply disrupted," he told the FM last week. "It changed many industries forever, including agriculture and mining."

Industries you’d expect to come out stronger may be those slanted to telemedicine, education or technology

There were some intriguing aspects to the post-1918 recovery that suggests the companies that will thrive aren’t necessarily the ones you’d bet on. In particular, that Spanish flu outbreak proved, as unlikely as it sounds, to be the making of SA’s insurance industry.

It began, as many victorious stories do, in tears. In February 1919, the journal Insurance bemoaned the fact that flu claims had led to a £1.3m spike in life insurance claims during the previous four months. Old Mutual chair John Merriman said this caused "a good deal of anxiety as to [the] future".

But in this gloom, life insurers saw opportunity.

They began advertising heavily. One novel result of the 1918 virus was that as South Africans began venturing back to the "bioscope" the next year, they saw something they’d never seen before: cinema adverts, jointly sponsored by SA’s insurance firms.

One advert showed a widow, with children climbing all over her. It read: "Insurance companies operating in SA have paid over £1m during October and November to the widows and orphans of breadwinners who died in consequence of the flu. The epidemic may return. Be prepared. Insure to the hilt. Do it now."

An Old Mutual advert was even less subtle: "The anguish and suffering from the toll of lives in Black October, 1918, are reflected in the hundreds of widows and orphans left almost helpless in our city. REASON: Life assurance neglected — no endowments fixed for children — in one word, Moneyless, and stranded … Untold misery to the living for years to come. Can any husband or father hesitate today?"

Manipulative? Sure. Unethical? Possibly. But it worked like nobody’s business. Life insurance premiums boomed. As Phillips wrote in his 1984 thesis: "In 1919, new life business alone was estimated as worth £20m — easily a South African record."

The Insurance journal lauded this marketing blitz, gushing that people "who as yet hardly know the meaning of life insurance will read, mark, learn and inwardly digest the truths in question, with the wished-for result that they will be ready and willing to sign the application." Funeral insurance also exploded.

Phillips says this, to him, was "one of the most astonishing economic stories" that emerged from 1918. Had you bet on who would win commercially from that outbreak, you wouldn’t have picked a firm that had had to pay out vast sums in insurance claims.

Right now, as we stare down the coronavirus, a few obvious stocks are the flavour of the month in the US. The shares of Nasdaq-listed teleconference company Zoom soared 105% this year, while Clorox, which sells hand sanitiser and disinfectant wipes, has gained 12.5%. Pharmaceutical firm Gilead has gained 13% this year as its remdesivir antiretroviral has been touted, prematurely, as a "cure" for Covid-19.

In a post-corona world, the industries you’d expect to come out stronger would probably be those with either a telemedicine, education or technology slant.

Which isn’t to say you can expect SA business to charge out of the blocks once Covid-19 has been defeated. After 1918, the SA economy lapsed into a grim recession during the early 1920s, and then again in the 1929 Great Depression. It was only after 1933 that the economy began to grow — largely due to gold.

But still, what the unlikely story of SA’s life insurance companies does show is that sometimes, the recovery begins where you least expect it.