Vaccine confusion, the humdrum of SONA - Capital Economics
Africa Economics

Vaccine confusion, the humdrum of SONA

Africa Economics Weekly
Written by Virag Forizs
Disappointing news from a trial of the AstraZeneca vaccine against the South African variant of COVID-19 will further complicate vaccination campaigns across the region, and could delay recoveries further. In South Africa, the annual State of the Nation Address (SONA) recounted many of the government’s previously outlined plans to recover from the coronavirus crisis but offered few new initiatives to support the economy.

AstraZeneca vaccines in Africa: to jab or not to jab?

Disappointing news from an AstraZeneca trial will further complicate vaccination campaigns across Sub-Saharan Africa. But heavy reliance on this jab is limiting policymakers’ alternative options.

The AstraZeneca vaccine was found to offer little protection against mild cases caused by the South African variant of COVID-19, while severe cases were not studied. The authorities in South Africa promptly halted the roll-out of the jabs.

African policymakers are receiving conflicting messages about using the AstraZeneca vaccine, which makes up an overwhelming share of supplies secured by many countries (nearly all Covax doses delivered in the near term, and about three-quarters of the African Union’s vaccine portfolio.) The WHO gave the green light to the vaccine, while the Africa Centres for Disease Control did not recommend its use in countries where the South African strain is dominant. Conflicting guidance may increase vaccine hesitancy.

But most countries in the region can ill-afford delays or problems with their vaccination programmes. Kenya announced that it will proceed with the roll-out of AstraZeneca vaccines. Others in the region will probably do so as well, especially if the South African mutation is not circulating widely. Some countries may opt to wait until efficacy against severe cases is shown. Further delays to already belated vaccine distribution in Africa are likely to result in the extension of containment measures that will keep a lid on economic recoveries.

Uninspiring State of the Nation Address in SA

The annual address by South African President Cyril Ramaphosa offered little to write home about with few new initiatives to support the economy.

As the AstraZeneca vaccine news threw the government’s vaccination plan into disarray, President Ramaphosa sought to reassure the nation by detailing an accelerated Johnson&Johnson vaccine roll-out timeline. Out of 9mn doses secured, 580,000 doses (enough to cover less than half of healthcare workers) will be dispatched in the next month with the first shipment arriving in a week. But no detail was given about the “fate” of AstraZeneca vaccines. Earlier reports suggested that the authorities may swap or sell these.

The State of the Nation Address appeared to be more of a catalogue of existing government programmes and plans. Indeed, President Ramaphosa said that “we stand here not to make promises but to report on progress in the implementation of the recovery plan”. Other than announcing the extension of income support measures and the creation of new regulatory bodies, much of the speech was old news. In some ways, it’s no surprise that we didn’t get more in terms of stimulus for the economy. After all, the precarious state of public finances has limited the degree of support throughout this crisis and will probably remain a key theme in the budget speech on 24th February.

Perhaps the biggest push was on energy policy. Persistent power cuts due to problems at Eskom, the state-owned electricity firm, are an increasingly painful thorn in the side of the economy. The government will seek bids from independent contractors – including from renewable sources – to supply 7,600MW of power this year. The target appears to be more ambitious than previous plans. And the regulatory changes that were announced could make it easier for companies to produce their own power. These may take a while to bear fruit however, leaving the economy saddled with power cuts that hold back the recovery.

The week ahead

Data will probably show that inflation picked up in January in both South Africa and Nigeria. (See Data Previews.)

Data Preview

Nigeria Consumer Prices (Jan.) Tue. 16th Feb.

Forecasts

Time (GMT)

Previous

Consensus

Capital Economics

Consumer Prices (% y/y)

15.8

16.1

16.0

Inflation to stay elevated

Figures due out next week will probably show that inflation in Nigeria rose to 16.0% y/y in January.

The headline rate shot up to 15.8% y/y in December, mostly driven by surging food inflation. Security problems probably disrupted the food supply chain, while a weaker currency and foreign currency restrictions appear to have pushed up imported food prices. That said, the rise in price pressures was broad based.

We think that persistent pressure on food prices pushed up the headline rate to 16.0% y/y in January. And a continued recovery in global oil prices probably put further upwards pressure on the headline rate through higher transport inflation.

The recent rise in inflation appears to have stayed the hand of policymakers at the Central Bank of Nigeria from delivering more monetary easing in recent meetings. But, as price pressures drop back towards the end of this year, we think that policymakers will lower the benchmark rate by 150bp to 10.00%. (See Chart 1.)

Chart 1: Nigeria Consumer Prices & Key Rate

Sources: CBN, NBS, Refinitiv, Capital Economics

South Africa Consumer Prices (Jan.) Wed. 17th Feb.

Forecasts

Time (GMT)

Previous

Consensus

Capital Economics

Consumer Prices (% y/y)

(08.00)

3.1

3.3

3.3

Inflation on the rise again

We expect that figures due to be released on Wednesday will show that South Africa’s headline inflation rate increased to 3.3% y/y in January.

The headline rate eased for two consecutive months, dropping to 3.1% y/y in December as a decline in transport inflation more than offset a further pick-up in food price pressures.

Food inflation probably rose further in January, and a recovery in global oil prices is likely to have pushed up petrol inflation. We think that the headline inflation rate picked up in January, reaching 3.3% y/y.

Looking ahead, the rise in food price pressures probably has a bit further to run. And a continued rebound in oil prices, combined with unfavourable base effects, will contribute to a sharp rise in the headline rate in Q2. But we expect inflation to soften thereafter. Policymakers are likely to look through the temporary jump in inflation and keep monetary conditions loose for much longer than most analysts currently anticipate. (See Chart 2.)

Chart 1: South Africa Consumer Prices & Key Rate

Sources: Refinitiv, CEIC, Capital Economics

Economic Diary & Forecasts

Upcoming Events and Data Releases

Date

Country

Release/Indicator/Event

Time (GMT)

Previous*

Median*

CE Forecasts*

15th Feb

Nam

CPI (Jan.)

(+2.4%)

(+2.6%)

Uga

Interest Rate Announcement

7.00%

7.00%

Bot

CPI (Jan.)

(+2.2%)

(+2.1%)

16th Feb

Nga

CPI (Jan.)

(+15.8%)

(+16.1%)

(+16.0%)

17th Feb

Nam

Interest Rate Announcement

3.75%

3.75%

Zam

Interest Rate Announcement

8.00%

8.00%

SA

CPI (Jan.)

(08.00)

+0.2%(+3.1%)

+0.4%(+3.3%)

(+3.3%)

SA

Retail Sales (Dec.)

(11.00)

+1.8%(-4.0%)

+0.5%(-2.0%)

Also expected during this period:

14th – 25th

Ang

CPI (Jan.)

(+25.2%)

(+24.6%)

Selected future data releases and events

22nd Feb

Nga

GDP (Q4, q/q(y/y))

(-3.6%)

23rd Feb

SA

Unemployment Rate (Q4)

(09.30)

30.8%

24th Feb

SA

Budget Speech

25th Feb

Zam

CPI (Feb.)

(+21.5%)

26th Feb

Uga

CPI (Feb.)

(+3.7%)

Ken

CPI (Feb.)

+0.6%(+5.7%)

SA

Trade Balance (Jan., SAAR)

(12.00)

+32.0bn

SA

Budget (Jan., SAAR)

(12.00)

+5.1bn

1st March

SA

Absa Manufacturing PMI (Feb.)

(09.00)

50.9

3rd March

Ken

Markit/Stanbic Bank PMI (Feb.)

(07.30)

53.2

4th March

SA

Electricity Production (Jan.)

(11.00)

(+1.1%)

5th March

Mau

CPI (Feb.)

8th March

Tan

CPI (Feb.)

9th March

SA

GDP (Q4, q/q(y/y))

+66.1%(-6.0%)

10th March

Gha

CPI (Feb.)

11th March

SA

Current Account (Q4, ZAR)

(09.00)

+297bn

SA

Mining Production (Jan.)

(09.30)

Also expected during this period: March

7th – 14th

SA

SACCI Business Confidence (Feb.)

9th – 20th

Ken

GDP (Q4, q/q(y/y))

(-1.1%)

10th – 17th

Nam

GDP (Q4, q/q(y/y))

(-10.5%)

11th – 18th

SA

Manufacturing Production (Jan.)

11th – 18th

SA

Retail Sales (Jan.)

14th – 21st

Uga

GDP (Q4, q/q(y/y))

(-2.2%)

*m/m(y/y) unless otherwise stated

Sources: Bloomberg, Capital Economics

Main Economic & Market Forecasts

Table 1: GDP & Consumer Prices (% y/y)

Share of

World 1

2009-18

Ave.

GDP

Inflation

2019

2020e

2021f

2022f

2019

2020e

2021f

2022f

Nigeria

0.80

4.4

2.2

-2.0

3.5

3.0

11.4

13.2

15.0

13.0

South Africa

0.57

1.5

0.2

-7.3

4.3

4.0

4.1

3.3

3.8

3.3

Ethiopia2

0.20

9.7

9.0

6.1

3.0

9.0

15.7

20.4

14.5

12.5

Kenya

0.18

5.6

5.4

-0.5

6.0

6.5

5.2

5.3

5.5

5.0

Angola

0.17

2.4

-0.9

-5.0

3.5

2.5

17.1

22.2

21.0

16.0

Ghana

0.13

7.0

6.5

0.5

5.5

6.5

8.7

10.0

9.0

8.5

Tanzania

0.12

6.5

5.8

1.5

6.5

6.5

3.4

3.3

3.0

4.5

Côte d’Ivoire

0.10

6.1

6.5

2.5

7.5

7.5

0.8

2.5

0.5

1.0

Uganda

0.08

5.3

6.7

-1.5

7.0

6.0

2.9

3.8

4.0

5.5

Zambia

0.05

5.6

1.4

-2.5

3.0

4.0

9.1

15.7

16.5

10.0

Botswana

0.03

3.7

3.0

-10.5

8.5

5.5

2.8

2.0

3.5

3.0

Mozambique

0.03

3.7

2.3

-0.5

4.0

4.5

2.8

3.0

3.0

3.5

Rwanda

0.02

7.2

9.4

-3.5

11.5

11.0

2.4

7.8

3.0

4.5

Mauritius

0.02

3.7

3.0

-15.0

12.5

6.5

0.4

2.5

3.0

3.0

Namibia

0.02

3.4

-1.0

-7.5

6.0

5.0

3.7

2.5

3.5

3.5

Sub-Saharan Africa

2.5

4.2

3.1

-2.4

4.6

4.8

8.3

9.7

9.8

8.5

Sources: Refinitiv, National Sources, Capital Economics. 1) % of GDP, 2019, PPP terms (IMF estimates); 2) Fiscal Years.

Table 2: Central Bank Policy Rates

Policy Rate

Latest

(12th Feb.)

Last Change

Next Change

Forecasts

End
2021

End

2022

Nigeria

MPR

11.50

Down 100bp (Sep. ’20)

Down 100bp (Q2 ’21)

10.00

10.00

South Africa

Repo Rate

3.50

Down 25bp (Jul. ’20)

None on horizon

3.50

3.50

Angola

BNA Rate

15.50

Down 25bp (May ’19)

Down 100bp (Q4 ’21)

14.50

13.00

Kenya

Central Bank Rate

7.00

Down 25bp (Apr. ’20)

None on horizon

7.00

7.00

Ghana

Policy Rate

14.50

Down 150bp (Mar. ‘20)

Down 100bp (Q2 ’21)

13.50

13.50

Uganda

Central Bank Rate

7.00

Down 100bp (Jun. ’20)

None on horizon

7.00

7.00

Sources: National Sources, Capital Economics

Table 3: Key Market Forecasts

Forecasts

Forecasts

Currency

Latest
(12th Feb.)

End

2021

End

2022

Stock Market

Latest

(12th Feb.)

End
2021

End

2022

Nigeria

NGN (Official)

381

400

400

NGSE

40,440

49,000

55,000

NGN (Nafex)

410

425

425

South Africa

ZAR

14.6

14.5

15.0

JALSH

66,170

75,650

91,550

Angola

AOA

648

700

750

Kenya

KES

109

115

120

NSE 20

1,890

2,250

2,650

Ghana

GHS

5.77

5.90

6.00

GSECI

2,178

2,400

2,800

Uganda

UGX

3,657

3,850

3,950

UGSE

1,375

1,500

1,700

Sources: Refinitiv, Capital Economics


Virág Fórizs, Africa Economist, virag.forizs@capitaleconomics.com