Here is Sihlobo…

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He says with only a week after the first case of the novel coronavirus (COVID-19) was confirmed in South Africa, the fear of a spread of the virus is changing consumer behaviour and demand patterns. There was a surging demand for sanitisers to an extent that several retailers had run out of supplies. In other countries such as the United States (US), consumers are on “panic-buying” mode, clearing shelves of everything from cleaning wipes, hand sanitisers to pasta, rice and bottled water. The United Kingdom (UK) is experiencing similar behaviour with retailers reporting a spike in demand for essential products and foods.

Sihlobo says the question now is will South Africa experience similar behaviour? According to him it is too early to tell, but the local growing demand for sanitisers, spooked by fear of the virus spreading, is similar to consumer behaviour in the US and UK when the first cases were reported. If a similar shift in consumer behaviour were to happen in South Africa, in the very short run, an increase in demand would be a positive for retailers, especially food and other essentials. In the medium term, however, depending on whether the virus continues to spread, there might be a decline in demand possibly due to quarantine restrictions, business and school closures and fear of exposure to public spaces with large numbers of people.

According to him businesses at the forefront of such an adverse shock would include restaurants (and subsequently agricultural suppliers), public transport, hairdressers and similar personal services providers, to name a few. Up to know not much changes have been noticed in consumer patterns in such establishments, at least from anecdotal observations over the past few days.

Another area highlighted last week is global agricultural value chains. The potential decline in Asia’s agriculture demand and falling prices could see the value of South Africa’s agriculture exports to Asia also declining in 2020. Together with that South Africa’s agriculture is export-orientated, with exports of roughly US$10 billion in 2019, the potential disruptions the coronavirus could cause on global value chains is a key concern. This is specifically the case for Asia, as the epicentre of the outbreak, and also an area that accounts for a quarter of South Africa’s agriculture exports. The commodities most exposed to the Asian market are wool, fruit, grains, beverages, vegetables and red meat.

The COVID-19 is a world-wide shock and it remains too early to make any definitive assessment of the potential economic effect. There is still a lot of unknowns, including how far the virus could still spread, particularly in Africa, how swift global efforts to contain the spread will be effective and how quickly consumer behaviour normalizes after the virus is overcome, says Sihlobo.

That was Wandile Sihlobo, chief economist, at the Agricultural Business Chamber of South Africa, Agbiz, only on Before Dawn.

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