THE BIG BUSINESSES ARE WORRIED: Social unrest on the cards in South Africa

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A significant share of South African companies are concerned about the potential for civil unrest as the country’s economy remains stagnant with high unemployment and inequality.

Allianz Commercial outlined these risks to businesses in its Political Violence and Civil Unrest Trends report for 2025.

The German insurer said businesses worldwide have ranked political risks and violence among the top 10 global risks for the past three years.

According to its latest research, civil unrest ranks as the biggest concern for more than 50% of company respondents globally, reflecting the fact that incidents are increasing and lasting for longer.

Political violence can impact businesses in many ways, from endangering the safety of employees and customers to causing business interruption losses and material damage to property or assets.

Companies can suffer indirect damage in the form of “loss of attraction” or “denial of access” to their premises.

This, in turn, has significant ramifications for insurers and reinsurers, which may have to rethink their coverage of such events or increase their premiums to ensure it is worthwhile.

“Political violence remains a top 10 global business risk according to our customers because politics is increasingly perceived as being dominated by populism and blame and division,” Srdjan Todorovic, Head of Political Violence and Hostile Environment Solutions at Allianz Commercial, said.

Todorovic also explained that rising inequality and perceptions of corruption in political institutions stoke fears of unrest.

The impact of civil unrest, strikes, riots, and civil commotion (SRCC) activity also ranks as the top concern in countries such as Colombia, France, South Africa, the United Kingdom, and the United States.

It is a view also shared by insurers who have seen the SRCC peril increase in frequency and severity in recent years.

Social unrest events, including riots in Chile and South Africa, have contributed to insured losses well in excess of $10 billion (R197.6 billion) over the past decade, surpassing other levels of political violence and terrorism insurance claims.

In certain hotspot territories, losses can rival or surpass those from natural catastrophes, while in others, although the direct impact may be minor, events can still trigger long-lasting changes in the societies they affect.

Allianz Commercial’s research shows that 79% of South African companies are concerned about civil unrest in the country, with many fearing a repeat of the 2021 July Riots.

This can be seen in the graph below, which is courtesy of Allianz Commercial.

Water shortages could be the spark
Many experts and, lately, even the President have warned that ongoing water shortages in parts of South Africa threaten to cause social unrest.

South Africa’s major metros, particularly those in Gauteng, have been hit by sporadic water shortages over the past two years.

This crisis is largely self-inflicted, with inadequate maintenance and failure to upgrade water supply systems being at the root of the problem.

The issue is not that the province does not have enough water. In contrast, its dams are relatively full. The problem is getting the water from the dams to the end user.

Due to leaks, over 40% of all water pumped from the bulk supplier, Rand Water, is lost before it reaches the end user.

“If we manage our water wisely, we certainly have enough to grow our economy and population. The problem is that we are not managing it wisely,” water scientist Dr Anthony Turton previously explained.

“It is not a water scarcity issue. It is an institutional failure issue.”

He further explained that, in Gauteng’s case, it is a very specific issue because three major metros contain a significant portion of South Africa’s national manufacturing capacity, and they are all at risk from water supply disruptions.

“Of course, when water supply is disrupted, businesses cannot operate. It means that there will also be an impact on the workforce,” he said.

“You must appreciate that water is the foundation of your national economy. It is the foundation of social stability.”

“Once your water infrastructure starts collapsing, you start to see things like social instability, the flight of capital out of the country, businesses collapsing, and the loss of jobs.”

“This is a national crisis. It is an existential threat to the very viability of our national economy.”

Ramaphosa recently added his voice to the warnings of social unrest from ongoing water shortages, saying that the crisis stems from a lack of investment.

“With this dire state of affairs, we have seen declining private sector investment in water infrastructure, a situation that is only now improving,” Ramaphosa said.

“By equal measure, municipalities have not reinvested the revenue they earn from the provision of services to the upkeep of key water infrastructure.”

“These are problems impacting a country with a growing population, which is one of the most water-scarce countries in the world.”

If these problems are not addressed, Ramaphosa warned that South Africa will face a perfect storm that is already resulting in social unrest.

“These factors make for what is called a perfect storm – where dry taps, broken infrastructure, and poor management of water resources at local government level is fuelling growing public discontent,” he said.

“Grievances with water and sanitation delivery are behind a number of social protests across the country.”

Source: https://dailyinvestor.com/south-africa/84809/social-unrest-on-the-cards-in-south-africa/

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