South Africa’s leisure sector shares took a tumble following COVID-19. Now, as lockdown measures ease, both stocks and infection rates are climbing.
On Wednesday 17 June 2020, South African President Cyril Ramaphosa announced that hotels, restaurants, beauty salons, theatres and, notably, casinos would be allowed to reopen following the COVID-19 lockdown, with the proviso that they adhere to strict health protocols. Although this evening message to the country did not specify a reopening date, the news itself was enough to cause a major spike in local gambling and leisure companies’ shares.
Traders Were Surprised
Many insiders believed that the leisure and recreational sector would be among the last to reopen, so Ramaphosa’s announcement took them by considerable surprise. Stephen Meintjes, head of research at Johannesburg firm Momentum Securities, told Bloomberg that the industry has been considered likely to stay closed, and had thus shown slow recovery since the initial lows in March when South Africa officially began to take lockdown measures.
A local index of leisure and travel companies further illustrates this point, and its 2020 figures had plummeted by 55% prior to Ramaphosa’s speech on Wednesday evening. In fact, fund manager Casparus Treurnicht, from Cape Town’s Gryphon Asset Management, commented that some investors expected the sector to remain locked down “right ‘til the end”.
However, on Thursday 18 June this state of affairs seemed to be showing a turnaround. Sun International Ltd. climbed by 23%, Tsogo Sun Gaming Ltd. by 30% and Tsogo Sun Hotels Ltd. by 18%, as of 3:06 pm. City Lodge Hotels, in the same time frame, shot up by 21%. With improved sentiment regarding the reopening of businesses, it seems, came improved stock value.
South Africa’s Infections Continue to Climb
The share price of travel, leisure, gambling and other entertainment industries is not, however, the only thing trending upwards in South Africa right now. Sadly, the country, which entered lockdown on the 27th of March, has seen the pace of new COVID-19 infections climb even as the government gradually eases lockdown measures.
To date, there are 80,412 confirmed cases of the novel coronavirus across the country. The number of cases is currently doubling every 12 days or so, and for the past two weeks (14 days) the daily new cases have been in excess of 2,100. In part, this is due to increased testing efforts by authorities, but it still points to an increased spread of the disease.
The question for South Africa, as for so many countries around the world right now, is whether the economic devastation of the lockdown merits the health benefits. Balancing these two issues is a constant struggle, and the upswing in the leisure sector is sure to carry financial benefits. With so much still not known about COVID-19, it’s almost impossible to know whether these will be enough to offset the risks.