Claims for damage and theft from businesses affected by civil unrest in South Africa are likely to be between ZAR7bn ($484m) and ZAR10bn ($692m), reported Reuters quoting the head of the only insurer covering political violence in the country.
The riots and looting which started on 9 July and ebbed on 17 July have left more than 117 people dead, hurt thousands of businesses and damaged major infrastructure, including telecommunications towers, in some of the worst civil unrest in decades.
Triggered by the jailing of ex-president Jacob Zuma after he failed to appear at a corruption inquiry, the unrest widened into an outpouring of anger over poverty and inequality.
South African Special Risks Insurance Association (Sasria), a state-owned insurer set up after private firms stopped underwriting risks relating to political violence due to unrest during apartheid, has received around ZAR100m in claims so far, its managing director Cedric Masondo told Reuters, adding this was expected to rise significantly.
The company, the only insurer to offer cover for such risks, expects total claims of up to ZAR10bn, or ZAR12bn in a worst-case scenario – making the unrest likely the most significant event in terms of the value of claims since Sasria was set up in 1974, Mr Masondo said. “This is the worst in terms of financial magnitude,” he said.
Mr Masondo said while Sasria has reinsurance cover that runs into the high single digits and can fund up to ZAR10bn of claims from its own balance sheet, it only covers customers up to a threshold of ZAR500m.
This will mean smaller firms will likely see their losses insured in full, while major companies that have suffered significant damage are likely to have to shoulder some of the losses themselves.
Many of South Africa’s small, medium-sized and micro enterprises (SMMEs) are not insured at all, compounding any attempts of recovery of those damaged in the unrest.
Around 40,000 firms have been affected in the Ethekwini municipality in the province of KwaZulu-Natal alone, with damages in the area put at ZAR15bn, according to its mayor.
Violence has been concentrated in KwaZulu-Natal, Zuma’s homeland, as well as the country’s economic and financial centre of Johannesburg and Gauteng province which the country’s industrial heartland.
Business Leadership South Africa, one of the main business lobby groups, estimates that damages amount to more than ZAR5bn and counting, for the retail industry alone, according to a Bloomberg report. More than 200 malls have been looted or destroyed and over 800 stores burnt or damaged.
Early estimates gathered from business associations indicate total losses might be in the range of ZAR20bn, reported Reuters.
Economist Khaya Sithole says the indirect costs could be even higher. “What remains unquantifiable, of course, is the long-term effects on people who lost jobs, or whose businesses have ceased to exist.”