Confidence key for South African future, say region’s risk managers

The call comes as experts fear further mining strikes in 2014 and also warn of the increasing risk that South Africa could become a failed state. Speaking at the recent Institute of Risk Management South Africa (IRMSA) annual conference, the call came on the back of suggestions that South Africa faces a tough future. Kay Darbourn, Director of Futurerisk Consulting, said: “There is a real risk in the negative press South Africa receives. People only want to hear the bad news but unless we start getting the positive aspects on the table, you will be continually putting the country down.hide“If you actually look at the way we handled the financial crisis, specifically from the banking sector, South Africa was successful and our economy continued to grow.” She was echoed by Ron Botes, Director-Risk and Assurance Services at Rain, who admits there is nervousness around the forthcoming general election next year. He told delegates that there is a ‘quietness’ around as investors hold back to see what happens. He also admitted that rising tension in Mozambique as elections take place and violence blamed on the opposition Renamo group escalates is having an impact. “It is the same worldwide, if there is instability in one area, it seems to have a ripple effect through the broader region. Africa’s history does have a part to play too as foreign investors have always got nervous around election time across the continent,” he said. However, Mr Botes said that he is optimistic for the country. “Look at King III and our regulatory environment—countries elsewhere are looking at what we are doing. I think the big problem is that many people view everything from a European context and are not really prepared to look at things from a local perspective. The African model is different and you have to understand the African environment.” Both he and Ms Darbourn spoke after scenario planner and author Clem Sunter had warned South Africa’s risk of becoming a failed state could increase. He pointed to recent figures from the International Institute for Management Development based in Switzerland which publishes a list of 59 nations in its annual World Competitiveness Report. In 2013 South Africa fell to 53rd position (from the previous year’s 50th). The warning comes, he said, because South Africa has previously been in the 30s and 40s and he believes investors are being deterred by fears around future government policy in areas such as mining and land ownership. The danger is that South Africa slides from the ‘premier league’ into the ‘second division’ and then runs the risk of becoming a failed state, warned Mr Sunter. The strategist has a series of ‘red flags’ which serve as warnings, including for South Africa, of the risk of nationalisation, a clumsy change to health provision, gagging the media and land grabs. In the past, he had given South Africa just a 10% chance of becoming a failed state but this has risen to a 25% possibility because of the uncertainty and tensions around employment and labour. Wildcat strikes, he warns, give the wrong signals to the wider world and put off potential investors. However, more positively, Mr Sunter rated South Africa with a 50% possibility of remaining in the premier league. Concerns around labour were echoed by Afzul Soobadaar, National Senior Commissioner at the Commission for Conciliation, Mediation and Arbitration, who warned of further strikes in the platinum belt next year. He admitted that negotiations were not going well, leading to fears of strikes early in the New Year. He said recent strikes had cost the country dearly, wiping off anything from 0.5% to 1.2% off the growth figures. One direct consequence of the spate of strikes had been the decision by BMW not to expand in South Africa, noted Mr Soobadaar. The car manufacturer has reportedly blamed problems with the labour force for its decision not to bring the manufacture of a new luxury car to South Africa. According to the South African Chamber of Commerce, a four-week strike in the car manufacturing industry caused export sales to drop 75% and cost the economy around US$2bn. Seven major motor manufacturers were caught up in the strikes, including Ford, General Motors, Mercedes Benz, Nissan and BMW. The strikes were reported to have involved up to 40,000 workers, demanding a 14% pay rise. Mr Soobadaar admitted that strike action in a range of sectors was doing more harm in terms of reputational damage to the country. He said South Africa has to tackle the underlying causes of the labour disputes and not just deal with the individual events. “Inequality, poverty and unemployment” dog the country, he said. “In South Africa, the average worker supports 2.1 people on their salary but if you look at blue collar workers they can be supporting up to 10 people on each salary. The Marikana strike was socio economic frustration that just manifested itself as an employment issue,” he said of the violent clashes and strikes in 2012 just before last year’s conference.

Confidence key for South African future, say region’s risk managers

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