Egypt was the first African country to confirm a Covid-19 case on the 14 February 2020. By then, China was on fire with 66358 confirmed cases. By then, United States had 13, Italy 2, Spain 3 to mention but a few countries. The second African country to confirm a case was Algeria on 25 February 2020 followed by Nigeria on 28 February 2020. Therefore, the month of February 2020 and the first half March 2020 appeared to be fine for the African continent with regard to the Covid-19 pandemic. However, things started to move from bad to worse in second half of March 2020 as shown in the graph. South Africa was the most hit reaching a peak of 243 new cases on 27 March 2020. Algeria with 132 new cases on 31 March 2020 marked the end of a turbulent month.

This graph shows the trend for March 2020 (daily confirmed cases) only and covering the top 20 (Africa, T20) most affected countries which included South Africa, Algeria, Egypt, Morocco, Tunisia, Burkina Faso, Cameroon, Cote d’Ivoire, Senegal, Ghana, Mauritius, Nigeria, DRC, Rwanda, Kenya, Madagascar, Uganda, Zambia, Togo and Djibouti.

But it gives a reader a glimpse into a worst case scenario where the “peak” continues to rise in the first half of April 2020. The raw data up to 6 April 2020 revealed that the confirmed cases from the top 20 affected Africa countries increased from 5469 to 9159, which is an average of 9% per day. A best case scenario would be that the number of new confirmed cases starts to reduce from 9% daily increase to 0% eventually. The increased number of confirmed cases could be due to the heightened testing as most Africa countries have now received the necessary tools to test for Covid-19. Most of the African countries have implemented partial/full lockdown to try and tame the spread of the virus for an initial period ranging from 14-30 days. Is it enough?

African continent had 9898 confirmed Covid-19 cases (afflicting 49 out of the 54 countries) by 6 April 2020.

There was optimism that the Covid-19 pandemic would ease by end of March 2020 following measures implemented by countries worldwide. These measures included closure of international airports, lockdown of most non-essential movement of people, working from home and social distancing. In the same month of March 2020, China started to ease the lockdown of the Hubei province and people were seen moving around the Wuhan capital and normal life had resumed after almost two months of lockdown.

Source of raw data that was analyzed by author.

When will other countries consider the Covid-19 to be history?

The answer lies in observing the trends on a daily basis. The graph has been compiled as follows. The rate of daily increase in the confirmed cases is taken for the top 20 affected countries in Africa. The author then isolated China, United States (USA) and Uganda to observe how each of those countries fared during the month. For example, USA cases increased from 2179 to 2727 on 14 March 2020, an increase of 25%. The Africa, T20 cases increased from 174 to 244 on 14 March 2020, an increase of 40% while China cases increased from 80945 to 80977 on 14 March 2020, an increase of almost 0%. The China line is the horizontal line (x-axis itself) as they at 0%.

By 31 March 2020, Uganda had a spike of 33% in confirmed cases to settle at 44 at end of that month. The numbers have since risen to 52 at 6 April 2020. The USA had 16% jump in cases on the last day but its graph appears promising with a downward trend. The Africa, T20 had a jump of 11% and increased by 9% per day up to 6 April 2020. China experienced large daily increase in confirmed cases for almost six consecutive weeks. Only when the daily rate of increase in Covid-19 confirmed cases falls to 1% or near 0%, lockdown may continue.

The investor should not hurry to sell just because the price has fallen. However, selling remains an option.

In regard to selected Ugandan equities, Uganda Clays appears to be an outlier with huge swings at both ends of the continuum. Nonetheless, lets pay attention to stocks that had consecutive decline in 2018 (YELLOW), 2019 (BLUE) and 2020 (RED). These include Uganda Clays, New Vision. On the Kenyan side, the stocks included Kenya Airways, Jubilee Holdings, NMG, CIC Insurance, Britam and Bamburi Cement. After a consecutive downward trend in prices, the cumulative gains become increasingly depleted or the cumulative losses keep mounting. In such circumstances, an investor may set a deadline after which may sell the shares to stop any further misery.

The global Covid-19 pandemic has caused financial distress more than the 2008 global financial crisis. However, there are some stocks that were already depressed even before Covid-19. The fundamentals of some of the listed companies have been worsened Covid-19 lockdown which has affected production and demand. If the fundamentals do not return to normal by 30 June 2020, then the stocks may not rally in time to bounce back by 31 December 2020.

If an investor sells, what to do with the cash? At the moment, fixe income investments like treasury bills may be a short-term solution while watching the movement of interest rates in Government bonds. With general elections coming up in Uganda in 2021 and Kenya in 2022, the interest rates may go up as Governments need to borrow domestically to plug gaps in domestic revenue.

Falling equity prices could also be an opportunity to buy stocks at give-away prices. Pension trustees and fund managers could look into the fundamentals of some of the companies and try their luck on the hockey stick.

The green colored bars (Year-end 2015) show how the share price changed between end of 2014 and end of 2015.  Bars to the right of the vertical PURPLE line (the 0% line) imply an increase in the stock price. Those to the left mean reduction in stock price. Most of the stock prices fell by end of 2015 and 2016. However, majority bounced back in 2017 as evidenced by the BLACK bars (end of 2017) to the right of the vertical line. 2018 (YELLOW) was a weak year, while 2019 (BLUE) was on the verge of recovery, especially the financial services and telecom. It will be observed that the RED bars (end of  March 2020) at the extreme left of the graph can be attributed to Covid-19 pandemic. For example, Bamburi Cement price lost 40% (drop), Kenya Airways -32%, Safaricom -9%, Absa Bank -24%, EABL lost 25% and so on between 2019 and March 2020.

What does this mean to an investor? The average drop in stock price for this basket of stocks was about 20%. If an investor had this basket wealth of say US$5million at end of 2019, about US$1million had been wiped out in the three months of January, February and March 2020 alone. However, this is termed an unrealized “loss” until the investor has disposed off some of the stock. Even then, the disposal of stock at time of falling prices does not automatically mean that an investor has lost money. There is need to calculate the cumulative gains or losses by reference to the selling prices and the costs at which the different stocks were purchased.

For example, an investor may have bought 100,000 Safaricom shares at end of 2014 at KES 14.0 per share. By end of December 2019, each share had risen to    KES 31.5. The investor had an unrealized gain of KES 1.75million (31.5-14)*100,000. However, the price had dipped to KES 28.8 at end of March 2020. There is a paper “loss” but in effect is a reduction in the cumulative gains from KES 1.75million to KES 1.48million (28.8-14)*100,000. 

At what point should the investor decide to sell?

The Institute of Certified Public Accountants of Uganda (“ICPAU) was established in 1992 by an Act of Parliament, now the Accountants Act, 2013. The functions of the Institute, as prescribed by the Accountants Act, are:

  1. To regulate and maintain the standard of accountancy in Uganda.
  2. To prescribe and regulate the conduct of accountants and practicing accountants in Uganda.

ICPAU selected J. Samuel Richards & Associates ("JSR") as successful bidder for development of the Strategic Plan for the period 2019-2023.

The primary objective of the assignment was to develop a strategic plan that will enable the Institute to increase its relevance, visibility and contribution to the economic development of Uganda.

The assignment is to be concluded by end of 2018.