As the City of Cape Town and the City of Tshwane are beset by striking taxi drivers and public workers, the insurance industry has warned that South Africa faces the risk of even more tensions and blowouts in the months to come.

This is according to professional services and consulting firm Aon’s latest State of the Insurance Market report for South Africa, which outlines the significant shifts that have been seen in the country and how they have impacted one of the biggest financial services industries.

According to the group, one of the biggest shifts in the market globally and in South Africa relates to growing instances of civil unrest.

Globally, the onset of the war between Russia and Ukraine in February of 2022 proved to be a seismic geopolitical event with tragic direct and indirect consequences – most importantly, loss of life and senseless destruction.

While the impact of the war has spanned across the globe, the volatility in markets had a severe knock-on effect that will be felt for years to come.

Notably, Aon said, the war has resulted in global insurers hardening for the first time since the September 11th attacks in the United States – and it is continuing to harden.

For South Africa, the global issues around riots, strikes and terrorism insurance are exacerbated by local troubles.

Aon said there has been a marked increase in conflicts, civil unrest and economic pressures. This has limited the number of underwriters in operation and has led to significant losses in the market.

It warned that South Africa is currently operating in a troubled political climate and that tensions are likely to rise with the national elections coming soon in 2024.

These risks are making affordable insurance coverage unachievable, the group said.

Following the July 2021 riots, the industry already took a massive hit. The state-owned South African Special Risk Insurance Association (Sasria) hiked rates and imposed limits in subsequent years, and certain sectors simply cannot find coverage anymore.

This has hit particularly hard in the retail, warehousing and mining industries, Aon said, which are at greatest risk of these incidents.

Ticking timebomb

Sasria warned in July that South Africa faces a repeat of the July 2021 riots if the country does not address pressing economic issues that have only been exacerbated by local and global issues.

One of the biggest issues, however, is youth unemployment, the group said.

Sasria said that young people in South Africa are sitting idle, and the anger of joblessness can be easily ignited.

In June, the Institute of Risk Management South Africa (IRMSA) said that among the country’s biggest risks is growing social unrest, with the group already noting a rise in protests and riots, fuelled by social and economic pressures that have persisted for almost a decade.

Economic challenges include stagnant growth, high unemployment, and persistent inequality – these have consistently ranked among the country’s major risks for years, IRMSA said.

Concerns over corruption, governance, the rule of law, and breakdowns in public service delivery have also been recurring themes.

Business Unity South Africa (BUSA) has also, in recent weeks, warned that the country is a ticking timebomb, urging the government to deal with flare-ups of discord and protest swiftly.

Despite the warnings and calls to do something, at least three major outbreaks of violent or disruptive protest have occurred in the past month alone.

In July, a spate of truck attacks and looting once again hit services on key freight routes on the N3 transport corridor. The July 2021 riots started from a similar seed of violence.

Heading into August, public service workers in the City of Tshwane downed tools and disrupted critical services in the municipality after being told they would not get a wage increase this year.

Despite the courts declaring the strike illegal – and the city moving to fire workers who don’t pitch for duty – the strike has continued.

The latest and most widely covered social unrest has broken out in Cape Town, with taxi drivers and owners, under the representation of the South African National Taxi Council, ceased all services and blockaded roads in the city for over a week.

The Cape Town taxi strike was expected to end on August 9th but was extended to the end of this week.

Worryingly, the strike has been accompanied by acts of intimidation and violence that have resulted in at least five deaths. Various industries impacted by the disruption have issued alerts calling for the end of the strike, pleading for stakeholders not to allow it to go the way of the 2021 riots.

source:Riot and strike warning for South Africa – BusinessTech