Neo Ralefeta

Neo Ralefeta

Neo Ralefeta | Treasury Structuring

Coronavirus, lockdowns, interest rate cuts and stimulus packages

On the 12th of March the World Health Organization (WHO) declared the coronavirus outbreak a pandemic as it is expected that the virus will spread to all countries across the globe. As of 12 March, 114 countries had been infected and nearly 4,300 people had died. By then, Italy had been the first country to implement a nationwide lockdown.
America then declares a national emergency to help combat the growing virus. Of course, without fail and always willing to spark controversy, Donald Trump suspends funding to the WHO accusing them of mismanaging and covering up the spread of the virus. He also imposes a travel ban on 26 European countries.
South Africa had only just discovered its first case from a man who had contracted the virus while visiting Italy with his wife. The ZAR took a significant knock, and traded above 19 to the US Dollar (weakest level in the history of the rand). The Sasol share price halved as global oil counters were hit by oil’s biggest daily loss since 1991.


The tone had been set and it was time to buckle up. Everyone looked to the central banks.
Ever since the Global Financial Crisis, central banks started gaining momentum as the world’s messiahs. Understandably so, we needed the monetary authorities to help with a financial crisis. Now the world was faced with a health crisis,  a pandemic, and we again looked to our heroes with capes and S’s on their chests. They did not let us down.
Amongst others, the Federal Reserve announced an emergency rate cut of 50bps to combat the coronavirus outbreak. US interest rates moved from 1.75% to 1.25%.
The Bank of England cut interest rates to 0.25% in an emergency move to combat the impact of coronavirus.


President Cyril Ramaphosa declared a national state of disaster and announced measures to contain a COVID-19 outbreak. 27 March was the first day of South Africa’s hard lockdown that was meant to last 3 weeks. The borders are closed and no travel will be allowed between provinces.  All gatherings, apart from funerals and for work are prohibited.
Our very own superheroes here, The South African Reserve Bank, step in. They reduce the policy rate with 100bps to 5.25%, and announces new liquidity measures to support banks, including a lower rate for commercial banks to borrow money from the SARB.  This is an attempt to ease the pressure on banks caused by the coronavirus outbreak. They also announced that they will increase the daily repo auctions to two per day.
SARB announces another 100bps rate cut, effective 15 April, in an emergency meeting. They announce that they will reduce overnight repo auctions to one per day from the two daily auctions it had implemented in March to inject liquidity into banking system to combat the effect of the coronavirus.
On the 15th of May they again reduce the repo rate by 50bps bringing the total interest rate cuts to 275bps so far in 2020.


Four subjects are trending… Coronavirus, lockdowns, interest rate cuts and stimulus packages. At this point, Covid cases has passed the 1 million mark and more than 42,000 people have died worldwide.


Meanwhile, the rest of the world was trying to keep turning, and get life back to normal. Senator Bernie Sanders dropped out of the presidential election and Joe Biden is announced as the new Democratic nominee. S&P, in the middle of the biggest world crisis of my generation, lowers South Africa's sovereign credit rating further into non-investment grade.

After the perfect Olympic logo was designed, the Tokyo 2020 Olympics are postponed to 2021 due to the rise of COVID-19 cases. The Olympic Games had never been postponed or cancelled for something other than war.


George Floyd is killed in Minneapolis while being arrested. Videos made by witnesses are then released to the public the next day which trigger worldwide protest against racism… #BlackLivesMatter


By the end of June, the world was right in the thick of things. It was all happening and it was a fine mess!