Damage to businesses caused by riots in South Africa may take years to repair
As business owners pick through the ruins of their establishments and thousands of workers contemplate a bleak and jobless future, the toll of South Africa’s worst civil unrest since apartheid ended will be paid for years to come.
A week ago, former president Jacob Zuma was escorted through prison gates, following an order by the country’s highest court that he be jailed for contempt. His supporters took to the streets and protests quickly became a conflagration of rioting and looting. At least 20 malls were destroyed or damaged, as were many warehouses, factories, distribution centres and delivery vehicles.
For now, it is difficult to quantify the exact loss, but early estimates gathered from business associations indicate it might be in the range of 20 billion rand ($1.38bn). Economist Khaya Sithole said the indirect costs could be higher.
“What remains unquantifiable, of course, is the longterm effects on people who lost jobs, or whose businesses have ceased to exist.”
The riots were confined to Gauteng, the country’s industrial heartland, and KwaZulu Natal on the coast. These two areas account for 55 per cent of the country’s economy.
South Africa has an official unemployment rate of 42 per cent and people on government aid outnumber the employed. State statistics show at least 600,000 jobs were lost during the Covid-19 pandemic alone.
The losses suffered by businesses will only add to the unemployment rate. They will also spill over into other areas as most companies relied on an ecosystem of support businesses to operate, said Mr Sithole. For instance, logistics companies that routinely deliver goods to retailers will lose a substantial number of routes because many of those businesses are no longer operating.
At the same time, future investments by businesses considering expansion or opening new branches are also likely to be delayed or cancelled.
“They’re going to say ‘let’s wait and see’ and repair our existing business before opening up shop elsewhere,” said Mr Sithole.
“Looking at the big picture, we are definitely a lot worse off on the basis of what’s happened over the last few days.”
For some, the events of the past week are a culmination of disastrous economic and social policies.
“This is the result of nine years of state capture,” said Bonang Mohale, chairman of South Africa’s largest freight and logistics company Bidvest, referring to the years in which Mr Zuma was steering the country towards an oligarchy. Forced out of office in 2018, Mr Zuma left a highly indebted economy growing at an anaemic rate of 2 per cent. Foreign investment was at a standstill, and by early 2020 the country’s sovereign rating was downgraded to junk status by ratings agency S&P Global Ratings.
Then came Covid-19. “By the time the pandemic came, we were already prostate, face down and absolutely finished,” said Mr Mohale.
With the country now rocked by a third wave of the pandemic, president Cyril Ramaphosa ordered yet another lockdown. “It’s not the first blow that breaks a rock, it’s the last blow,” Mr Mohale said. With youth unemployment – those aged between 18 and 32 – of more than 72 per cent, it was only a matter of time before unrest broke out.
“We have 10 million young people sitting without work, not in any kind of training or life preparation. The devil finds work for idle hands.”
For now, it is up to insurers to help mitigate the losses. This will mostly fall to the South African Special Risks Insurance Association, a state-owned body that is also the country’s only short-term insurer that offers cover against damages and losses arising from riots.
“Insurance coverage for big business is quite high but for small business it is very low,” said Sasria’s managing director Cedric Masondo. The transport industry alone has already claimed 100m rand for the loss of lorries torched.
A long-term concern is how the unrest will play out with South Africa’s trade partners. The Richards Bay Coal Terminal, the largest of its kind in the world, exports about 90 million tonnes of coal a year, much of it to India. The RBCT was forced to close because of threats to its staff this week, halting the loading of ships.