Global tensions shake the foundations of risk and underwriting

The New Year is an opportune time to take a temperature check of the economic and political events likely to affect your business over the coming year. For South African insurance and investment stakeholders, this means figuring out how economic growth, geopolitics, inflation, interest rates and local elections will affect your bottom line.

How the macro factors affect you

Justin Naylor, CEO of ITOO Special Risks, has firsthand experience of how macro factors play out in the risk management and underwriting environment. To help spread the word among his insurance peers, he secured one of South Africa’s foremost political economy analysts, Daniel Silke, to lead a fast-paced online presentation on how economics and geopolitics might rewrite business rules in 2026. The expert was challenged to make sense of Trump, tariffs and the ongoing global transformation. 

Silke rattled off countless observations during his 60-minute talk, beginning with the insane pace of geopolitical shocks in just four weeks of 2026. “President Donald Trump’s administration has unleashed a whole raft of new consequences for the world … the new administration has a different way of looking at geopolitics,” he said. Early on, he reminded the audience that what happens outside of South Africa’s borders is critically important, with all manner of knock-ons into the domestic economic and political fabric. 

The political economy expert hinted at an emerging America First ideology overlay for the entire Western hemisphere, with Trump’s America doing whatever it deemed necessary to protect this expanded, notional territory. He noted the US-led military operation that captured Venezuelan leader Nicolás Maduro and transferred him into US custody and Trump’s posturing around Greenland as illustrative of the extent to which the administration might deviate from historical norms. 

The ideology-linked rift

“There has been an ongoing and slow ideology-linked rift forming between the US and the major European powers,” Silke said. Key differences arise from funding arrangements for NATO; the response to Russia’s incursion into Ukraine; and regional stances on immigration, to name a few. “These last few weeks have sort of destroyed the old world order, [potentially pushing us into] a post-NATO world,” he added. For the mere mortals in the webinar, the outcome is unprecedented uncertainty, fear even. 

Canadian PM Mark Carney scooped another webinar mention at this point, following his special address to this year’s WEF Davos event, around 20 January 2026. Carney called on the so-called “middle powers” to cooperate more closely in a type of us-versus-them approach to US dominance. “The middle powers are countries that have relatively large economies, are strategically located and can play a major role in geopolitics,” Silke explained. He mentioned countries like Argentina, Brazil, India, Nigeria, South Africa and some of the Gulf economies, including Saudi Arabia, in this club. 

The US faces a long list of external and internal disruptors. Externally, it has to navigate tricky issues like Iran and Gaza-Israel and Trump’s proposed ‘Board of Peace’. Internally, it faces societal rifts in response to its immigration enforcement and constant scaremongering over potential meddling in the US Federal Reserve. Silke pointed out that markets had already reacted to Trump’s new Fed nomination. “Kevin Warsh is not someone who is necessarily going to force dramatic interest rate cuts into the future, and that is why you saw gold and silver prices take something of a beating of late,” he said. 

China-US rivalry ongoing

To wrap the global context, the presentation dipped into the military, technology and trade-based rivalry between China and the US. According to Silke, these superpowers will go head-to-head on artificial intelligence (AI) and critical minerals and commodities over the coming years. “The US is about to launch a $12 billion critical mineral stockpile fund to blunt its reliance on China,” he said. Despite this rather volatile underpin, the IMF has pencilled in 3.3% in global GDP growth for 2026, with no hint of recession in any of the major economies. The EU will stumble along at around 1.3% versus 2.5% for the US. 

“The big growth is coming out of emerging and developing Asia and Sub-Saharan Africa,” Silke said. South Africa, meanwhile, is looking at a top-end estimate of around 1.5% for the current year. “Viewed together, the growth forecasts show an important shift from growth led by advanced economies … to growth led by emerging market and developing economies,” he said. Many of the fast growers belong to the ‘middle power’ countries mentioned earlier, or another geopolitical construct labelled the Global South. 

South Africa fancies itself a major player in each of these movements but might be better advised to focus on domestic problems. Silke pointed out that South Africa had endured over a decade of sub-par economic growth and wealth erosion. “About 60% of under-24s are unemployed … with major implications for social stability,” he said. This low-growth, high-unemployment backdrop is compounded by a lack of foreign direct investment into the country, and a reluctance among private sector decision-makers to deploy capital domestically. 

Reasons why SA firms sit on their cash

There followed a long list of reasons why large firms are sitting on their cash, including Eskom, infrastructure failure and policy and political uncertainty. To further compound matters, South Africa has a “very restrictive regulatory burden” that spans ownership and labour, putting the country at the bottom end of the OECD’s friendly regulatory environments chart. And then, we have the ruling African National Congress’ unique take on winning friends and influencing people. Silke rattled off a list of diplomatic missteps involving SA government snubs of the US in defence of members of another geopolitical club, BRICS. 

Silke blocked the last 10 minutes of his presentation to discuss a few domestic “green shoots” and hopefully lift the doom and gloom hanging over the webinar. The biggest plus, allegedly, is what the presenter described as political stability under the Government of National Unity (GNU). Yes, dear reader, we have heard this one before, with the key observation being that the bumbling-along GNU foisted on South African voters was better than an ANC-EFF-MK partnership. Of course, but this writer is tired of being sold the best worst outcome. 

The second plus point did little to lift the smog either. Silke noted that the GDP growth outlook was marginally improved, and that a range of macroeconomic factors were swinging in the right direction. Other notables were that inflation was under control; that consumers should benefit from two interest rate cuts this year; and that resurgent gold and platinum group metals prices would give the South African Revenue Service (SARS) more cash to burn without having to raid taxpayers via an income tax or VAT hike. “Thanks to a higher gold price, we should be able to stabilize our debt position too,” Silke added. 

Nicely done, you are almost back at the start

It is difficult to celebrate positive metrics when your country is merely creeping back to the position it enjoyed five or 10 years back. So, your writer struggled to shout hurrahs on news of increased throughput at major ports, or higher tonnages through the Richards Bay coal terminal, or Eskom uptime, or tourism numbers etc. The strong rand got a wry smile though; it is, after all, always strongest around the time one is forced to move some funds from offshore back home. “The rand hovering at about R16 to the dollar at the moment, but it should settle at levels that are a little bit more acceptable to exporters,” Silke said. 

The final minutes of the presentation dived into the country’s political prospects. Silke was critical of a democratic system that allowed 500 parties to contest for votes; warned about the damaging impact of land expropriation and nationalisation of the Reserve Bank for political ends; and joked about Julius Malema’s recent promise “to rule the EFF from jail” should that become necessary. “We are going to see a highly contested and fragmented political terrain over the course of this next year,” Silke said. And that, dear reader, seems as good a point as any to end this reportage on. 

Writer’s thoughts:

Local businesses cannot afford to ignore today’s messy geopolitical landscape. Do you consider global political risk in your advice or underwriting decisions, or do you simply dismiss it as background noise? Please comment below, interact with us on X at @fanews_online or email us your thoughts [email protected].

Comment on this Post

Name*

Email Address*

Comment*

 

Submit Comment