ANDREW LAPPING: A fatally flawed lockdown plan
As alarming fatality predictions are revised, the data shows SA’s lockdown is doing more harm than good
As South Africans, we want our country to prosper and everyone’s quality of life to improve. Millions live in poverty and rely on family to get by: life is tough, and often short, as malnutrition and hardship take their toll.
However, I am concerned that the lockdown, and the resulting economic hardship inflicted on our people, will cost more lives than it can save.
An effective government must make difficult decisions that involve trade-offs and cost-benefit analysis. We shouldn’t trade lives for economic growth, but we must consider how to save as many lives as we can, while improving the lives of as many people as possible with limited resources.
President Cyril Ramaphosa’s initial lockdown decision was justified to buy time to gather health resources and prepare hospitals. It was never meant to be a strategy to eliminate Covid-19 entirely — that is impossible.
Rather, the idea behind the lockdown is that the same number of people get ill, but infections are spread out so as not to overwhelm the system.
The economic damage will linger. Tax collections are unlikely to recover for many years
But as new information emerges, it seems Covid-19’s mortality rate is far lower than many feared. Many of the more alarmist predictions that had led to lockdowns globally have proved flawed. There are now two critical questions:
- How many Covid-19 fatalities can be avoided through the lockdown?
- What is the economic and human cost of the lockdown?
On the first point, the available information indicates that lives saved by the lockdown will be minimal, unless the number of infections is suppressed until a vaccine arrives. Data shows the mortality rate for those younger than 70 is lower than 0.2%, while only 2.9% of SA is older than 70. It may sound tragic and defeatist, but it isn’t possible for a lockdown to make the virus disappear.
Economic and human costs are two sides of the same coin. Studies indicate that mortality rates double with job losses. A smaller economy means fewer resources to allocate to health care and education. The National Treasury thinks up to 7-million people could lose their jobs. This could lead to tens of thousands of additional deaths.
Ramaphosa’s stimulus package is R500bn. The SA Revenue Service thinks tax collection could fall by R250bn this year due to the shutdown. This implies additional debt of about R500bn in a single year.
The economic damage will linger. Tax collections are unlikely to recover to previous levels for many years, and the R50bn interest bill on this extra debt means R50bn less to spend on education, health care and other services — not just in 2020, but in perpetuity.
An extreme worst-case scenario for SA is 150,000 Covid-19 deaths (most models indicate a worst-case scenario of 50,000). This is based on half the population contracting the virus with a 0.5% fatality rate.
This is a huge number of deaths and a great tragedy. Let’s assume the lockdown reduces fatalities by 50% by suppressing the illness until a vaccine is found. This would be an incredible success, as 75,000 lives would be saved.
The direct cost per life saved in this scenario is R6.6m, while indirect costs will be far greater. I know this puts a price on human life but, unfortunately, this is what the government has to do every day when allocating resources.
Alternatively, if the disease can’t be stopped, and a vaccine isn’t discovered, then almost no lives will be saved — but we will have destroyed the economy, increased government debt by R500bn, and lost many lives through higher mortality unrelated to Covid-19.
Sadly, because SA is a poor country, we have a high mortality rate, and low life expectancy: 410,000 people die of natural causes each year, including 37,000 from tuberculosis and 32,000 from diabetes. Also, 15,000 die in road accidents and 21,000 are murdered. These deaths are equally tragic, maybe more so, since they are often preventable.
Unlike Europe, SA has a limited social security net. Many people have no savings and have lost their livelihoods due to the lockdown. Hunger is an immediate reality, and malnourished children are disadvantaged for the rest of their lives. True, the government provides a child grant — but millions of immigrant children cannot access it.
Just as economic growth and prosperity save lives, economic destruction and poverty cost lives.
So why am I writing this now? First, every week the lockdown continues, the economic cost compounds.
Since the lockdown began in March, I have urged the government to consider the full picture, including the human and economic costs of its decisions. I provided it with balanced data, and detailed how this data shows the lockdown strategy is tragically flawed.
We can no longer blame "the virus", when most of the job losses and suffering is due to a strategy that hasn’t fully accounted for the human cost of the lockdown on the economy.
- Lapping is chief investment officer at Allan Gray. This article, written in his personal capacity, has been edited for space