South African businesses face billions in damage costs from rioting

Claims for damage and theft from businesses affected by civil unrest in South Africa are likely to be between ZAR7bn ($484m) and ZAR10bn ($692m), according to news reports from South Africa. The riots and looting, which started on 9 July and ended 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 about ZAR100m in claims so far, its managing director Cedric Masondo said, before warning this was expected to rise significantly. The company 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 added. 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 are not insured at all, hampering any attempts at recovery from those damaged in the unrest. About 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, Mr Zuma's homeland, as well as the country's economic and financial centre of Johannesburg and Gauteng province, which is the country’s industrial heartland. Early estimates gathered from business associations indicate total losses might be in the range of ZAR20bn, reported Reuters. The Sasria cover is bought through insurance companies, which administer/manage the cover. When a business incurs a loss or damage as a result of civil unrest, insurance companies will act as mediators and hand over the claim to Sasria. Depending on the Sasria cover, businesses can receive a payout of between ZAR500m and ZAR1.5bn. No excess payments are required for Sasria claims. Mr Masondo said: “We won’t go to court or spend money on lawyers to decide if your claim is valid or not. We are not going to define what a ‘riot’ means and reject claims if it falls outside of the riot definition. From our point of view, these are all Sasria-related claims and payments can be made within a week.” He added: “We have been deeply concerned since the outbreak of these riots. We are hard at work attending to the concerns raised by our clients and are attending to the claims we have received to date. “We would like to assure our clients, partners and stakeholders that our internal systems are ready and have been curated to respond with the necessary agility when we are contacted, doing so expediently and effectively. We are working very closely with other insurance companies to make sure that we fast-track the payment of claims that have started coming through, especially from individuals and small businesses. “Together with our distribution partners, insurers and brokers, we have already appointed loss adjusters and assessors that have already started on assessing the extent of damages, and we have started paying claims.”

South African businesses face billions in damage costs from rioting

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