News in South Africa 15th March:

1. Big risks ahead for businesses:

Risks to business in South Africa are changing rapidly, and it’s keeping insurers awake at night, says Lizo Mnguni, spokesperson for Old Mutual Insure.

Big risks ahead for businesses
Photo by Andrei

Such risks are likely to impact the insured during 2023 and significantly affect those that do not have any sort of insurance.

Mnguni said that the following risks are those that can be expected to cause increased insurance risks in 2023:

Load shedding

“While everyone has come to accept the instability of the national grid, reports are suggesting that load shedding is likely to be a guaranteed event for the next two years. In this scenario, we are in for a bumpy ride,” said Mnguni.

Mnguni said that Old Mutual Insure had noticed a significant increase in claims, especially power surges claims, given the frequency of outages.

“Since 2018, the number of electronic equipment, burst geysers, and power surge claims have risen by 93%,” he said.

“Power surge claims are increasingly becoming difficult to insure. Insurance companies are in the business of managing risk, and when the frequency and severity of claims increase, it can impact the availability and affordability of insurance coverage.”

Climate change and weather

Weather risks are making it more important that insurance coverage is maintained, said Mnguni.

He said that we are currently in a prolonged La Niña cycle, which is wreaking havoc on the country.

“We have seen the effects of the Johannesburg floods in late 2022, brought on by La Niña, and of course, the biggest catastrophic event of 2022 – and in history – the KwaZulu-Natal floods.”

Recent data from Old Mutual Insure showed that the average annual CAT (catastrophe) claims in the last ten years between 2012 and 2022 are ten times higher than they were between 2000 and 2011.

He said that policyholders may have previously thought that they don’t need specific insurance because the infrastructure surrounding their property is good, with minimal risks, but this is also changing.

Economic climate

Mnguni said that higher levels of inflation will likely be around until early 2023 before tapering off in the second half of next year – making it more important for companies in the country to be insured.

Civil unrest

“There is a greater risk of civil unrest in 2023 as opposed to 2022, especially around the instability of the grid. We are keeping our eye on this,” says Mnguni, recalling the unprecedented riots of 2021.

He reminds policyholders that if they experience damage to their properties because of civil unrest, it would be covered under SASRIA.

2. Gold and bitcoin surge:

Bitcoin hits 10-month high and gold breaks above $1 900/oz, as contagion fears from the collapse of Silvergate and Silicon Valley Bank spread.

Bitcoin broke above R470 000 in SA and flirted with $26 000 on Tuesday, as investors digested a week of frightful news from the banking sector.

First it was the collapse of crypto-enabled bank Silvergate, which went into voluntary liquidation last week. The New York Stock Exchange-listed company announced it would wind down operations and voluntarily liquidate the bank in an orderly manner so that it could repay all deposits.

Then it was the turn of the 16th largest bank in the US, Silicon Valley Bank (SVB), which was shuttered and placed in receivership by the US Federal Deposit Insurance Corporation (FDIC) on Sunday.

On the same day, Signature Bank New York was shut down by the Federal Reserve “to protect the US economy by strengthening public confidence in our banking system”.

Though the Federal Reserve assures depositors that they will get their money back, three banking failures in a week did little to assuage fears that something more profound is afoot in the global financial system.

Bank stocks in the US and around the world tanked. Nasdaq’s bank index is down more than 20% so far this year, and the JSE Banks index shed more than 7% over the last week.

Bitcoin (BTC) notched up its best three-day run since October 2019, as it brushed $26 000, and gold broke above $1 900/oz, returning it to levels last seen in February. Both are perceived as stores of value in times of risk.

These events have put the banking sector on watch.

3. Govt plan to protect food production:

South Africa’s government has contingency plans in place to safeguard key food-production facilities against an escalation in power cuts that are already at record levels, the nation’s agriculture minister said. 

While a total collapse of the national grid is highly unlikely, measures have been taken to ensure abattoirs can continue operating and animal vaccines are protected, Agriculture, Land Reform and Rural Development Minister Thoko Didiza said in an interview at Bloomberg’s Johannesburg offices on Monday.

“There is a plan in place already,” to deal with a situation whereby outages are increased and 8 000 megawatts of generation capacity or more is cut from the grid, she said. 

 Longer-term, the government is looking at how best to further assist farmers who want to install solar panels and batteries to reduce their reliance on the grid, according to the minister. Financing could be made available from existing institutions such as the state-owned Land and Agricultural Development Bank of South Africa and the Industrial Development Corporation, she said.

Farmers have traditionally relied on generators to supplement power supplied by Eskom. The increased severity of blackouts has increased their running costs, with a knock-on effect on food inflation — which accelerated at the fastest pace in 14 years in January. 

A range of other options are being considered to mitigate the effect of load shedding on farmers, including the feasibility of exempting them from outages, scheduling blackouts outside of their operating hours or connecting farms to mini grids, Didiza said. 

4. Solar “gold rush”:

Eric Putsman from PV Consult says electricians who install solar power systems are experiencing something similar to a gold rush.

He said solar panels are scarce due to high demand – pushing prices up.

He added that the market is growing in commercial and residential properties and utility companies, with many installers scrambling to get necessary equipment – resulting in six to eight weeks of waiting for consumers.

The greatest demand is in Gauteng, Cape Town, and eThekwini.

5. Hate bill passed:

Five years since a bill was introduced to criminalise hate speech and hate crimes, it has finally been passed in the National Assembly.

Despite fierce debate and concerns from some opposition parties that it could impact the freedom of speech, there has been overwhelming support for the Prevention and Combating of Hate crimes and Hate Speech Bill.

Deputy Justice Minister John Jeffery said that existing laws had proven ineffective in stemming what he believed to be an increase in crimes motivated by hate.

The DA’s Janho Engelbrecht said that he believed that the African National Congress (ANC) was motivated by a political agenda.

“It will almost certainly have a chilling effect on freedom of speech and expression and will affect more vulnerable people, more seriously.”

But Jeffery said that this was untrue.

“Despite what they may be doing to score political points in creating all sorts of conspiracy theories, I want to make it clear that the bill is not targeting any particular group of people. It applies to everyone equally, and it provides broader protection to everyone in society.”

All information sourced from articles posted by: BusinessTech, Moneyweb, Fin24, City Press and EWN.

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