‘Worst case scenario’ will see repeat of July riots in South Africa

Absa has published a list of factors which are likely to swing South Africa’s economy in either a negative or positive direction in the coming months.

One of the key concerns raised by the group is the possibility of social unrest, with the July 2021 riots in KwaZulu-Natal and parts of Gauteng not only causing billions of rands in damage but also causing significant damage to future investment in the country.

While the alleged orchestrators of the unrest have been named by the police ministry, to date, no one has been convicted. This protracted investigation and apparent lack of accountability could heavily factor into how things proceed from here, Absa said.

The bank outlined three main scenarios it could see stemming from the unrest.

  • Absa’s baseline scenario assumes no one is brought to account for the 2021 unrest, and KwaZulu-Natal remains fractious, but there is no big further eruption, just small, localized service delivery protests.
  • In the bank’s upside scenario, rising socio-economic opportunities and greater political responsiveness diminish the risks of social unrest, particularly as the organisers of the July 2021 riots are brought to account.
  • The bank’s downside scenario forecasts another big eruption of unrest along the lines of July 2021 riots at some point.

The South African Special Risk Insurance Association (SASRIA) has already warned that it cannot afford to cover the country’s businesses should it see a repeat of the July 2021 riots in the coming years.

Sasria is a state-managed entity that provides cover for riots and other damage caused by civil violence. In a presentation to the National Council of Provinces at the end of April, the group said that the riots in KwaZulu-Natal and parts of Gauteng saw it payout over R37 billion in damage claims.

Sasria added that major retail groups such as Shoprite, Pick n Pay, and the Foschini Group could pull disinvest from the South African economy if this cover is not provided. Sasria is currently restricting all of its clients – including these major retailers – to a maximum cover of R500 million, which is ‘clearly not adequate’.

The group noted that reinsurer Lloyd’s of London had hiked premiums by as much as ten times in the last year as it is of the view that similar riots could reoccur in the country in the future.

The riots, which were the worst since the end of apartheid and claimed 354 lives, led to heavy criticism of president Cyril Ramphosa’s government and its ability to respond to major security issues. The perceived lack of response from the government subsequently led to a cabinet reshuffle and the axing of the national police commissioner.

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‘Worst case scenario’ will see repeat of July riots in South Africa