Economic impact of riots and looting in South Africa and wider emerging problems

 ·15 Jul 2021

Plans to send 25,000 soldiers on a peacekeeping mission to Kwazulu-Natal and Natal have come too late, says Peter Attard Montalto, an analyst at Intellidex.

Currently, 5,000 members of the South African National Defence Force (SANDF) have been deployed to curb violence and looting which has gone on for the best part of a week in parts of the country. And this number is up from 2,500 initially deployed to help police, who were quickly overwhelmed by the sheer number of protestors and opportunists.

Taxi drivers, private security companies and ordinary civilians also stepped up to protect their businesses and communities.

“This is far too late with the tide already turned – though it is clearly useful in now maintaining order. The true number now to be deployed is in dispute given reservists are being called up and this number includes support staff.

“There may be something closer to 15,000 maximum on the ground we believe, and still much lower in the short term. Overall government has been far too slow to deploy the army in this required size given the multiplicative effects of looting they should have been deployed through Sunday,” said Attard Montalto.

He said that order in Gauteng is now largely restored, while tensions remain high in KZN, and could flare up again.”We are now into the ‘long tail’ as the peak in looting and general mayhem is replaced by a more insidious phase focused on arson and infrastructure sabotage in KZN mainly.

“We are very concerned about a very delicate situation of ethnic tensions in KZN that the EFF and others are keen to fan, adding in community militia and now mercenaries to KZN to protect private property is a very unstable pressure cooker which the Zuma-faction will also want to exploit,” he said.

Minister in the Presidency Khumbudzo Ntshavheni on Wednesday told reporters that incidents of looting and violence had died down while describing the violence as “economic sabotage.”

“We are not at liberty to announce who is behind it,” she said. “If we do so we will jeopardize the investigation and possible prosecution of people.”

Cost of damage

As cleanup operations get underway in some areas, Business Leadership South Africa estimates that damages amounted to more than R5 billion and counting for the retail industry alone. More than 200 malls were targeted, over 800 stores were looted and 100 were completely burnt, its chief executive officer Busi Mavuso told Bloomberg.

Citing credible industry sources, Attard Montalto said that in Durban’s economic zone R1.5 billion in stock has been lost, with R15 billion in damages to property. He said that 50,000 informal traders and 40,000 businesses have likely been impacted by the violence and looting.

He warned that as many as 150,000 jobs are at risk, meaning as many as 1.5 million homes are without incomes.

Companies including Cashbuild, Clicks, Mr Price and Steers and Wimpy fast-food restaurants operator, Famous Brands, have already begun to tally the damage done to their operations in Gauteng and KZN.

Mr Price said that 109 of its stores were looted, and another 539 were closed, while fast-food restaurant operator Famous Brands said 99 stores have been damaged and are non-operational. Cashbuild said that 36 stores have been damaged and looted and are currently unable to trade.

Attard Montalto said that the impact on Durban’s GDP could be as much as R20 billion. Overall, he put a total cost on the country’s GDP at about R50 billion and the GDP loss at about R40 billion, or about 0.7% of GDP.

Wider concerns

As tensions begin to die down, Attard Montalto said that in the aftermath new concerns arise, namely a fiscal response to the carnage. This includes calls for a response from the government at an overnight National Economic Development and Labour Council (Nedlac) meeting.

The Congress of South African Trade Unions (Cosatu) tabled proposals for a ‘Disaster Relief Fund package’ while the country’s largest trade federation said that there was also an urgent need to finalise the discussions around the introduction of the basic income grant to help bring some relief to the millions of unemployed South Africans.

“The proposed disaster management relief should be focused on the objectives of providing relief for workers and communities, funding of township and rural economy, and the broadening of the social welfare transfers,” it said.

“Many communities and workers are going to pay a huge price for this anarchy. Hundreds of thousands of jobs are going to be lost and vital community services are going to be severely disrupted by this brazen looting and destruction.

“There is an urgent need to finalise the discussions around the introduction of the basic income grant to help bring some relief to the millions of unemployed South Africans.”

Cosatu said that the disaster relief fund must include the following key components:

  • Food parcels for affected communities who now have no money or place to buy food.
  • Reinstatement of the R350 Covid-19 Grant for all unemployed persons across the country.
  • Insurance relief from insurance companies and SASRIA for destroyed businesses and property.
  • Unemployment Insurance Fund’s Covid-19 TERS relief for workers from KZN and GP who will now lose wages and jobs as their workplaces have been destroyed.
  • Pension withdrawal relief for workers who have lost wages or are struggling.
  • Tax and municipal rates relief for affected businesses.
  • A revamped Loan Guarantee Scheme to assist companies to rebuild.
  • Loan and insurance policy payment holidays for affected workers and businesses.
  • Tripling the Presidential Employment Programme’s budget from R11 billion to R33 billion so that it can create at least two million jobs.
  • Practical actions by government and businesses to ramp up local procurement to help save countless companies and jobs.

“In responding to the crisis, the South African government has no choice but to abandon its austerity framework and chose an expansionary fiscal policy framework,” Cosatu said.

“This moment calls for a change of mindset and an acknowledgement of the fact that the current unemployment and poverty levels are not sustainable.”

Attard Montalto said that National Treasury “will be generally stuck in the mud” about doing an emergency budget. He believes that the state company can afford the proposed measures above, including some additional spending on infrastructure for rebuilding.

“Overall we think these policy responses will take time to get through a sticky NT to reality in the coming weeks, and then a risk of fewer rather than more as we learnt from the waves of Covid crisis since last March.”

Read: These are the instructions and the rules soldiers have to follow when confronting looters and rioters in South Africa

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