Pandora’s box opened in South Africa as foreign investors look on: analyst

President Cyril Ramaphosa’s address to the nation on Monday evening (13 July), to quell the ongoing violence and looting in Gauteng and KwaZulu-Natal, failed on many fronts – and may have exacerbated the situation.

This is according to Intellidex analyst Peter Attard Montalto, who said the unrest in the country is not being met with the needed urgency and force from the government and police officials, and thus carries long-term risks, even after the riots have subsided.

Attard Montalto said that the non-reaction from president Ramaphosa and police officials has given the thousands of looters and rioters the confidence to act with impunity. “Pandora’s box has been opened,” he said.

While the president’s speech pointed to community engagement and dialogue, what’s needed is “rapid and overwhelming use of force”, the analyst said. “The situation will not be solved by community engagement ‘kumbaya’.”

“The president’s address was a serious failure on a number of fronts and has made many people angry at its tone and lack of recognition of the scale of what is happening. It further caused a deterioration in sentiment and hope that anything was being advanced or that there was a show of force.

“The speech was very poorly pitched for the seriousness of the situation, had a serious communications misstep by increasing fears around food security – that can trigger hoarding – offered nothing new that was not already stated earlier in the day on security deployments, and only mentioned the rapid prosecution of those arrested and that there would be community dialogues.

“That is not going to solve this,” Attard Montalto said.

While the underlying spark of the riots and looting may have been political – tied to the arrest of Jacob Zuma and having the flames fanned by his supporters – the analyst said that it is now squarely in the hands of opportunists, who will gladly mention Zuma’s name as justification for their actions.

While Ramaphosa spoke of over 400 arrests, it was clear there were tens of thousands of looters involved, who suffered zero consequences.

The analyst warned that long-term unrest is now rising on the list of risk factors for South Africa – and something foreign investors will be taking note of.

In the short term, for many businesses, the damage is done. Supply chains have been disrupted, and there is a possibility of food hoarding due to Ramaphosa’s speech.

There may also be a delay in grant payments due to delays in cash-in-transit over the risks, which will likely compound the social issues tied to the riots, he said.

The South African Social Security Agency (SASSA) said in a statement on Monday that due to the current violence, cash-in-transit (CIT) companies will not provide any cash delivery services to its cash pay points until further notice.

“Beneficiaries are urged to remain calm and await communication as to when the payment at pay points will resume,” it said.

In the medium term, Intellidex’s baseline is that unemployment will not recover meaningfully and jobs won’t be created – at least not enough to absorb the numbers needed to quell the larger unemployment crisis. Unemployment is expected to rise slowly over time.

South Africa’s official unemployment rate rose to a new high in the first quarter of 2021. The jobless rate climbed to 32.6% from 32.5% in the three months through December, Statistics South Africa said in June.

In the long term – unless the government makes a show of force, proving it is in control – the likelihood of similar action increases, as the social pressures mount, and looters and rioters know now they can act with impunity.

Attard Montalto said that the riots may be close to their peak, “but a long tail is our key fear. In particular, other areas of the country see some new looting – and impunity still creates the atmosphere for lower levels of looting to continue in Gauteng and KZN. As such the situation may ebb and flow”.

Read: 200 shopping malls looted, and an estimated R2 billion lost: has Ramaphosa made a mistake?

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Pandora’s box opened in South Africa as foreign investors look on: analyst