South Africa is poised to experience a surge in COVID-19 cases as the country immerges from a strict lockdown. The government has a roadmap to slowly allow the restrictions to be lifted, but a recent court ruling says that their roadmap is unconstitutional. Africa’s three biggest economies are experiencing higher infection rates nearly doubling in the first week of June. South Africa is experiencing an 80% daily increase in COVID-19 infection rates, which is overly concerning to authorities. In March and April, the South African rand was hammered, but since that period it has recaptured a large portion of the losses against the US dollar.
How South Africa Has Kept Infections Down
South Africa was able to keep infections Low
South Africa was able to keep its infection rates exceptionally low by adhering to a strict lockdown that was implemented countrywide. South Africa’s restrictions started on March 27, sharply limiting any movements by individuals. This action accelerated the slowing of the US economy that was already experiencing a contraction. During the first week of June, the South African government began to ease restriction moving them to what they consider as level 3. This allowed the opening of large parts of the economy and abolished curfews. Alcohol went back on sale under strict rules, but tobacco sales within South Africa remain banned.
Restrictions are Being Challenged
The restrictions that are in place are being challenged. During the first week of June, the South African government was dealt a blow by a South African court which ruled that the regulations and restrictions that were put in place were unconstitutional. The government has not been given two weeks to change the regulations, but the government is now appealing the ruling.
The easing of the restrictions has created a scenario where COVID-19 can now spread. South Africa has reported a record jump in new Covid-19 cases, which saw a nearly 80% higher than its previous daily record. On June 4, South Africa recorded 3,267 new Covid-19 cases, which was the biggest jump since the pandemic began. The country is the worst hit in sub-Saharan Africa and has nearly a quarter of all cases on the continent, with 40,792 infections. More than 60% of the South African cases are in the Western Cape province.
How has the South African Rand Reacted?
The forex markets have experienced a wild ride. Initially, the South African Rand tumbled falling to more than 19 per USD in March and early April but began to start to rally in May. The Rand has rallied has recovered approximately 40% of the losses it has experienced in March and April. Weekly Momentum on the USD/ZAR has turned negative as the MACD (moving average convergence divergence) index generated a crossover sell signal. This occurs as the MACD line (the 12-week moving average minus the 26-week moving average) crosses below the MACD signal line (the 9-week moving average of the MACD line).