Brace for a tough 2022

Massive insurance premium hikes will make everything more expensive

SOUTH Africans splurging during the festive season will find themselves with a lot less money come the new year.

This after Sasria put up the price to insure commercial vehicles like trucks by more than 1 700% as of February 2022. With South Africa’s rail infrastructure crumbling, most goods are moved by road and on trucks and, as a result, prices of goods are likely to go up.

Sasria is the South African Special Risk Insurance Association and is the only organisation in the country to offer insurance against public unrest, civil commotion, strikes, riots and terrorism.

It is in the process of paying out billions of rand after the July unrest when trucks and businesses were looted and burnt, mainly in KwaZulu-Natal and Gauteng.

The cost of the violence amounted to R50 billion, making it the most expensive riots in the world.

Muzi Dladla, the executive manager at Sasria, said they had received 14 031 claims to the value of R32 billion since the unrest.

“From this amount, Sasria has paid out more than R16 billion. One of the major premium increases from February 1, is for heavy motor vehicles which are trucks. The premium goes up by about 1 700%.”

Dladla said truck owners paid an annual amount for riot cover.

“Vehicles insured from R100 000 to R2 million are currently paying between R16.43 and R326.78 for cover for each vehicle in their fleet. With the new premium, truck owners will pay between R326.78 and R6 000.98 for cover for each vehicle.

“We have received a number of queries about the increase and we have provided sufficient response and justification for the increase per year.”

In October, National Treasury released a statement saying that it was giving Sasria R3 billion because Sasria did not have sufficient funds to settle all claims.

For the trucking industry, this latest move puts into question the financial viability of some businesses. If the increases are passed on to the consumer, it will mean the cost of goods will shoot up.

Yaga Govender, the chairman of Positive Freight Solutions and the owner of Dawns Trucking, said the decision to increase the premiums was made without consultation with the relevant bodies.

“We want to work with the government and Sasria is a government entity. They need to engage with us before making such decisions. Our organisation has raised our concerns with the Department of Transport.

“We are crying out to the government about the impact these premiums will have on business. They will only provide feedback in February.”

Govender has worked in the trucking industry for 34 years and has more than 50 trucks.

His company has branches in Verulam in Durban, Kempton Park in Gauteng, and Paarl in Cape Town.

The company distributes chemicals. “During the unrest, four trucks and four trailers that belonged to my fleet were torched. I am still waiting for Sasria to pay me out R8.2 million.”

He said corporate companies would be able to meet the premiums but smaller businesses would not.

“It is not fair for a person running a small trucking business with about two or three trucks to pay the same as a corporate company, which has 3 000 vehicles. The smaller businesses that also contribute to the economy are going to suffer. This is going to lead to their businesses closing down, unemployment and poverty.”

Aven Naidu, the owner of AveMel Logistics in Pinetown, said: “The increase is going to cripple the trucking industry because truck owners will not be able to afford the premiums.”

Naidu has 35 trucks and 50 trailers. His company transports canned food products, medicines and refrigerated goods.

“In order to pay these premiums, truck owners will have to hike their prices for transporting goods and as a result, the manufacturers will have to increase their food prices, and ultimately it is the man on the street who will suffer.”

Naidu said: “We did not call for the looting. Sasria has been operating since 1979. What have they done with all that special risk insurance money?”

Gavin Kelly, the CEO of the Road Freight Association, said: “We are not happy with these increases. What happened to the billions of rand that were collected over all the years? Where has that money gone, into state coffers?

“Has it now disappeared or is it not available to cover these costs? Why must we, the victims, suddenly have to bail out Sasria in terms of this? We are the ones attacked.”

Kelly said the costs should be borne by the state.

“They did not react. They did not prevent the damage no matter how many times we called for assistance, for action, for investigations and follow-ups to deal with those responsible.”

He said a business person could not go to a regular insurance company and get this type of cover. Kelly said it was the state’s responsibility to keep premiums down and to ensure political riots and protests were dealt with.

“Companies will now have to choose whether to take out this optional cover and to carry the risk. Obviously, this will mean more companies will be vulnerable and face total destruction and closure. There will be more job losses.”

Niki Moore, a senior researcher, at ChickenFacts, said according to their research poultry prices have risen above inflation for the past 10 years.

ChickenFacts is a body that deals with challenges in the poultry industry in South Africa.

“One of the causes of the price increase, ahead of the festive season, is the recent looting. Other causes are the cost of chicken feed, droughts, avian flu, high prices for fuel and increased tariffs on chicken imports. The expected Sasria premium hike in February is also likely to increase the price of chickens due to transportation costs.”

Moore said the rising price of chickens were a concern because it was the most popular and affordable protein.

“It is a mainstay of the food basket for middle-to-low-income consumers along with eggs and tin fish. Any price hike on these items will affect the poorer communities.”

During a recent interview with ChickenFacts, Kelly said the cost of food would rise.

“With the cost of petrol, which has just hit a record high, the deteriorating rand-dollar exchange rate, and the decrease in business confidence, it is likely that prices will continue to climb steeply.”

Kelly said food such as poultry was transported many times in its journey from the farm, or the port, to the dinner table.

Each leg of these journeys, he said, would become more expensive.

“During the harsh lockdown, when only essentials were allowed to be transported, obviously the prices went up. Unfortunately, during that time, a number of transport companies went out of business, and this had an overall impact on supply and demand.”

Kelly told the POST that the association was looking for a way to ensure its members were provided with some sort of cover at affordable rates.

“The association has had interactions with Sasria but these have not managed to resolve the matter of the huge increases.”

Erwin Rode, an economist, said the premiums would affect consumers.

“In the case of insurance entities like Sasria the policyholders will pay. If the policyholder is a freight company, the freight company will try to pass it on to their customers, and the latter will try to pass the extra expenditure on to their customers in turn.”

Rode said the inflation rate was accelerating, causing interest rates to hike.

“This is putting extra pressure on the consumer as the general prices of goods and services go up. Within the transport industry, the inflation rate will also cause the transporting of goods to become more expensive.”

Ultimately, consumers will pay for the increases.

“There is no free lunch. This is a good example of one of the reasons why unstable countries cannot flourish.”