Grid collapse – and 3 other massive risks that South Africa urgently needs to plan for

Chief risk advisor of the Institute of Risk Management in South Africa (IRMSA), Christopher Palm, has highlighted four key business risks that every company in the country should have on their radar.

Speaking in an IRMSA webinar on how risk professionals should be responding to various crises in South Africa, the expert noted that the country has become synonymous with talking about bad things happening but not doing anything about it.

He said this extends to the private sector and the entire risk industry in the country, adding that risk reports for the last eight years have flagged all the crises that the country is now in the middle of.

From electricity and water problems, to growing incidents of civil unrest and political instability, all these issues have been repeatedly called up as risks. Still, nothing was done to prevent their outcome.

Palm said that the risk industry, in particular, is hamstrung by its very nature. By design, the risk management process is flawed, he said, because “it is making it about our businesses”, not about formulating strategies.

“If we are going to move from just reporting on risk to making a difference or taking action, then we have to make a few adjustments,” he said.

He said risk managers need to ensure risk assessments are linked to an executable strategy and that this strategy is tied to key performance indicators.

These KPIs need to be attached to someone who is ultimately held accountable for the metrics, he said.

This is clearly a difficult task, as risk is, by its nature, difficult to determine and calls for various scenarios to be fleshed out and contingencies put in place. However, he highlighted four big risks to businesses in South Africa that are currently staring risk managers in the face.

He said these should be on every business’s radar, and a plan should be in place “tomorrow – or even this afternoon” if not in place already.

1. Foreign policy with Russia and China

Palm said one of the biggest risks to businesses in South Africa is being underestimated, and that it the growing divide between east and west – and South Africa’s position in terms of foreign policy.

“There will be a global viewpoint taken (on Russia and China) and South Africa will be expected to take a position,” Palm said, adding that all South African businesses will face repercussions.

Regardless of the cause or source – whether the country picks a side, tries to stay neutral, or something else – businesses need to assess their position and to this and how it will impact their operations.

He said this risk is being underestimated in the market.

2. Whistleblowing

Palm said that it has become clear that South Africa is looking at whistleblowing and whistleblowers very differently.

Instead of responding to what whistleblowers are revealing, there are investigations into the credibility of the whistleblowers and the origins and extensiveness of the allegations.

He said that businesses need to consider their stance on whistleblowing, adding that it provides a huge opportunity to implement effective controls when addressing pervasive and entrenched fraud and corruption.

3. Coalition governance

Webinar keynote speaker Justice Malala highlighted the political instability South Africa currently faces, with the governing African National Congress (ANC) seemingly losing support at the polls.

This opens the door to coalition governance entering the picture, which brings with it a whole new set of challenges. South Africa has already had a taste of how coalitions are executed in the country, with some major metros being forced into this situation after the 2021 elections.

On a national level, Palm said that there is no telling what the outcome will be, but he said that businesses should start mapping out different scenarios and how their operations will be affected.

4. Grid collapse

The elephant in the room is the ongoing power crisis. Palm said that since his days working at power utility Eskom, he has always defended the notion grid and downplayed the possibility of a total collapse – simple because it was an unimaginable scenario.

However, things have changed.

“We need to start considering the possiblity of a blackout. It is a lot more likely (now) than it was two or three years ago,” he said.

He said that while some risks sound tongue-in-cheek or distant, businesses seriously need to go back and review their business continuity plans relating to grid collaps.

Most of these plans would have been built three years ago around a downtime of up to 4 hours with an 8-hour gap in between. This situation has changed, he said.

“If you speak to Vodacom, MTN, our telecommunications network – anybody that uses alternative energy sources – we have to challenge our existing businesses continuity plans.

“Instead of a blackout, I’ll say an extended period of outage – meaning you are going outside of the window of current technology and what current technology allows you to run off the network,” he said.

Businesses running on alternative energy need to review their whole solution, looking at how long batteries last, how long they take to charge, and what kind of intervals increased load shedding will result in.

Speaking to Business Day, Palm expanded on this, saying that the country has reached a stage where preparation for a complete blackout needs to be factored into strategic planning for the remainder of the year.

“It is better to have an unused plan than none at all,” he said.

Read: Eskom to suspend load shedding again this weekend – here is the new schedule