The uncertainty over whether vaccines will be effective against Omicron won’t help uptake, says Nedbank CIB

By James Glover, Managing Executive: Markets at Nedbank Corporate and Investment Bank

Covid news again rattled through global markets on Friday, 26 November, as the Omicron variant caught everyone off guard. Markets had been complacent about the current situation – Delta variant spreading but with vaccines doing their job of preventing severe disease and death. The knee jerk reaction of clamping down on travel from the Southern African region has landed particularly poorly both in South Africa and internationally – and I expect some easing of that rhetoric – especially given that it looks like the horse has bolted and many countries are detecting community spread of Omicron already.

Ramaphosa’s speech on Sunday, 28 November gave us little we didn’t know, and I suspect his pleas for the unvaccinated to get to their nearest vaccination site will fall on deaf ears. There is probably going to be a need for more interventionist measures to get the numbers up – whether that takes the form of vaccines mandates, supporting business in their efforts to enforce vaccine mandates or the current European approach of targeted lockdowns on the unvaccinated. There is little appetite, and most importantly, political capital, for lockdowns and I suspect the threshold will be set very high to go back to anything like what we saw during the Beta and Delta outbreaks. This will likely give some sectors a reprieve versus previous outbreaks but won’t be enough to save the hospitality sector over the festive season, which is in for another rough ride as the growing momentum in global travel is brought to a screeching halt.

The uncertainty over whether vaccines will be effective against Omicron certainly won’t help uptake. Most theoretical models point to immune escape, but, as was the case with Beta and Delta, we will have to wait for actual data. The market will be keeping a very close eye on real-world data in Gauteng and particularly the hospitalisations and death statistics for the vaccinated. If we don’t see a material difference in these statistics versus Delta or Beta then expect the recovery to continue unabated. If we do, however, we will be in for a rough ride as global growth gets downgraded again and countries scramble to stay ahead of it. Either way, there will likely be a new global discussion on how we live alongside this disease.