Slow vaccine roll-out may derail SA’s economic recovery, says Old Mutual

Slow vaccine roll-out may derail SA’s economic recovery, says Old Mutual


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OLD MUTUAL yesterday warned the slow vaccination programme in the country, coupled with a third wave of Covid-19 infections and load shedding, could derail the pace of economic recovery in South Africa.

South Africa has vaccinated about 2.23 million of its citizens, with only 480 000 that are fully vaccinated, which represents less than 1 percent of the country’s population.

The pan-African financial services group said in an operational update for the five months to the end May that vaccination roll-outs across the continent had been slow an,d according to Bloomberg data, only eight countries have vaccinated more than 5 percent of their populations to date.

“Covid-19 infection rates are rising as the third wave continues to gain momentum in South Africa.

“The country has enforced adjusted level 3 lockdown restrictions in an effort to curb the spread of the virus. Uganda and Namibia have also reimposed strict lockdown measures to curb the surge in Covid-19 cases,” Old Mutual said.

The group felt the impact of the pandemic in its results after it reported a loss of R5 billion for the year to end December, hurt by the direct Covid-19 impact of R6.1bn due to an increase in pandemic reserves, business interruption, rescue claims and negative impact of market losses in the group’s credit and private equity portfolios. However, the group said yesterday that it continued to closely monitor the impact of Covid-19 on its claims experience.

“Our claims experience is in line with expected claims levels assumed in the December pandemic reserve, set up for the anticipated impacts of Covid19 in 2021. At this stage, it is too early to determine whether additional provisions will be required at the end of the first half of 2021. The reserve will be assessed at the end of June, taking into account the possibility of further waves and other developments relating to the pandemic,” the group said.

Despite the uncertainty caused by the potential third wave outbreak, Old Mutual said profitability had improved compared with the same period last year, as a result of a higher asset based fees due to an increase of 13 percent in average funds under management (FUM). The closing FUM at the end of May was 17 percent ahead of May 2020 levels. The group’s profitability also improved as a result of improved credit experience due to a deliberate focus on tightening of credit criteria and more selective offers to customers in Old Mutual Finance in South Africa.

“The non-repeat of the negative mark to market losses in Old Mutual Investments and significant level of Covid-19 business interruption and rescue claims in Old Mutual Insure in the prior year positively impacted profits for year to date,” the group said.

Old Mutual added that it remained on track to deliver its cost-savings target of R750 million at the end of 2022.

Old Mutual shares closed 0.08 percent lower at R12.91 on the JSE yesterday.

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