South African companies that operate in China, and those that export to and rely on imports from that country, are facing disruptions as the death toll from the coronavirus continues to rise.
Naspers, which has a 31% stake in Chinese media giant Tencent through its Prosus unit, said this week it has suspended all company travel to and from mainland China until further notice. Its Hong Kong office is closed until tomorrow, when restrictions are due to be lifted by the Chinese government.
"Everyone travelling on company business has been advised to take appropriate precautions and all have access to the latest information and support provided by our international medical and travel security services partner," Naspers said.
Dr Jonathan Broomberg, CEO of Vitality Health International for Discovery, which has a 25% stake in Chinese health insurer Ping An Health, said all of Discovery's China-based employees are currently out of China, due to leave taken for the Chinese new year on January 25.
"We are working with our colleagues in China to determine the appropriate time for them to return to China. The Ping An Health operations in China closely follow the requirements laid down by state and provincial regulators. This has included precautions such as work-at-home policies. The authorities in China have been highly communicative and clear in their guidance," said Broomberg.
Work from home
Standard Bank, which has operations in several parts of China including Beijing, Guangdong and Wuhan, said it is implementing clinical protocols for staff returning to SA as advised by the bank's occupational health practitioner. These include consulting a doctor upon their return to SA and working from home for 14 days, which is the incubation period for the virus, Standard Bank said.
Pharmaceutical firm Aspen has a commercial office in Shanghai with sales, distribution and marketing arms. Stavros Nicolaou, Aspen's senior executive for strategic trade and development, said the company will not be substantially affected. He said the company is following the precautions advised by the Chinese government - "so everybody works from home and there's the normal travel ban until the end of February".
There is a definite
concern of lower
demand for SA
goods in China
The coronavirus was first reported in Wuhan on December 31. The death toll on Friday stood at more than 600, with more than 30,000 infections confirmed. It has spread to more than 20 countries.
Bloomberg reports that the World Health Organisation has identified countries such as SA, Nigeria, Kenya and the Democratic Republic of Congo as priority zones for containing the spread of the virus in Africa.
The global implications of coronavirus are still unfolding. A slowdown in the Chinese economy, which accounts for 16.3% of world GDP, will send not ripples but waves across the globe, according to an IHS Markit research note.
China is SA's biggest trade partner. SA's main exports to China in 2019 were mineral products valued at R102bn, followed by iron and steel products. Vegetable exports were valued at R3.8bn last year, said Heinrich Krogman, senior economist at Tutwa Consulting Group.
"There is a definite concern of lower demand for South African goods in China, and this concern goes both ways since we buy a lot of inputs and final [finished] products from China that we use in our economy. China's demand drives a lot of our industries' activity and finding alternative markets to fill a potential 'Chinese demand gap' could prove difficult," said Krogman.
South African citrus growers will recommence exports to China in May after harvest. A few knock-on effects are anticipated in the sector, said Justin Chadwick, CEO of the Citrus Growers Association of SA. "Countries like Egypt, that normally send sizable volumes into China, are finding that demand has reduced" and as a result they are sending fruit to other markets, and possibly SA - which could depress local prices, he said.
"If lockdowns, curfews and travel restrictions are still in place when our season starts in earnest [in May, running until August], then we will be in a difficult position.
"China has been taking ever-increasing volumes of South African citrus - the impact of lower demand in that market will be extremely negative, especially for sectors with low profit margins, like grapefruit. Recently the Chinese have taken a liking to grapefruit," he said.
SA's citrus exports to China grew to 170,000t in 2018 from 100,000t in 2017,
according to Chadwick.
Martyn Davies, MD of emerging markets and Africa at Deloitte, said supply disruptions have begun materialising.
Trudi Hartzenberg, executive director for the Trade Law Centre, said: "To the extent that South African companies source products or components, or have products produced in China, they will be impacted.
"Supply chain slowdowns and increases in costs will be the result."
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