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Up in flames. South Africa’s R12 … R25 … R50 billion looting conundrum

20 July 2021 Gareth Stokes

Whether or not South Africa’s state-owned special risks insurer, Sasria SOC Limited, has a strong enough balance sheet to survive the country’s 11-16 July 2021 looting frenzy depends on the eventual price tag for loss and damage suffered by insured businesses and individuals during the chaos. The insurer’s MD, Cedric Masondo, is on record that Sasria will honour all claims stemming from the unprecedented civil commotion; but we got the feeling that his assessment of the capital and in-force reinsurance treaties available to compensate for damages may have been at the lower end of loss estimates. Around Wednesday, experts were talking about R7-10 billion but by the weekend we saw some estimates topping R50 billion.


Peter Attard Montalto, head of capital markets research at Intellidex, estimated R15 billion in damage to property, and R1.5 billion in stock losses in and around Durban alone, with the total cost to the country at around R50 billion. He was extensively quoted in a article where he opined that the unrest would cause significant job losses and blast a R40 billion ‘hole’ in the country’s 2021 GDP number. Most analysts have already sounded the alarm over the longer-term impact of this type of lawlessness on foreign direct investment as international investors reconsider their global options. The latest unrest came on the back of many simmering tensions at large infrastructure and mining projects, where mafia-like criminal groups often demand protection money or shares in exchange for protection (sic). International firms are also dissuaded by South Africa’s tough employment equity, ownership and mining royalty regimes. 

A staggering picture of damage and loss 

Of course, these concerns take a backseat following the mainstream and social media coverage of the recent mayhem, which is said to have started in protest to ex-President Zuma’s incarceration. In truth there is multiple complex factors contributing to the unrest which we will not unpack here. What we can report is that estimated that more than 3000 stores had been damaged and / or looted during the unrest. We turned to various company announcements, including SENS news releases issued to shareholders, in support of this estimate of destruction. 

  • Banks and financial services: Standard Bank, on the fringes of its announcement of a decision to buy-out minority shareholders in Liberty Life, reported that it had closed 116 branches in Gauteng and 81 branches in KwaZulu-Natal, with damage to 33 of these branches. It also confirmed that 220 out of its total 2400 ATMs had been damaged. Nedbank meanwhile indicated that 37 of its branches and 117 ATMs were damaged. And the Banking Association of South Africa estimated that “over 1400 ATMs and close to 300 bank branches and post office outlets had been vandalised” countrywide. 
  • Building material retailers: The country’s largest building materials retailer, Cashbuild, reported that 36 of its stores had been damaged and were unable to trade immediately following the unrest. They have yet to announce a timeline for the reopening of these stores, saying that the extent of the damage was still being assessed. 
  • Fashion retailers: Pepkor issued a statement last Friday, 17 July, that approximately 9% of the group’s total retail stores had been damaged and / or looted, totalling 489 stores. It noted: “the group’s supply chain and distribution operations in the affected areas have been severely disrupted and numerous additional measures, including tactical security, have been put in place to safeguard the group’s distribution infrastructure and assets”. Meanwhile, The Foschini Group (TFG) said around 190 stores had suffered varying degrees of damage. And, not to be left out, Mr Price Group announced that more than 109 stores, or 7% of the group’s 1592 store total, had been entirely looted.
  • Fast food and restaurants: Famous Brands (JSE: FBR) said that 99 of its restaurants had been damaged during the looting, with most of these located in KwaZulu-Natal. Its logistics facility, also based in the province, was damaged and remained closed mid-week. Many more stores were closed for safety concerns. 
  • Food manufacturer: Tiger Brands (JSE: TBS), one of South Africa’s Top 40 constituent shares, issued a SENS announcement on 15 July 2021 in which it reported looting and vandalism in KwaZulu-Natal and Gauteng “had a material impact on operations”. Acts of looting and vandalism resulted in damage to both its rice and snacks and treats operations., though it was difficult to assess the damage due to ongoing security concerns. Per the SENS: “It is currently estimated that the loss of stock exceeds R150 million” while business interruption losses were “still being quantified”. 
  • General retailers: Spar was particularly hard hit with a total of 184 stores, including 62 Tops liquor stores and 31 Build-It stores) “severely impacted”. These stores were mostly in KwaZulu-Natal. 
  • Listed property: Some of JSE’s listed property firms published updates in the immediate aftermath of the civil unrest, with Exemplar (JSE: EXP) announcing that five of its retail assets, either wholly- or part-owned, were affected. Redefine (JSE: RDF) also alerted shareholders to “sporadic incidents of looting and damage to certain of its properties”. They added that approximately 2% (by value) of the total property portfolio was affected, but that they could not quantify the damage at this early stage. 
  • Logistics: Forget the disruption to countrywide freight hauliers due to road and infrastructure shutdowns and reflect instead on the R35 million and counting damage estimate given by the Road Freight Association following the torching of 35 trucks in KwaZulu Natal. Many more trucks and vehicles were torched at business premises countrywide, including motor vehicle dealerships in areas around Johannesburg. The media reported on two uninsured car lots lost 32 and 52 vehicles respectively. 

Economic versus insured loss

Could Sasria be called upon to pay-out the entire R50 billion in estimated losses? It is, after all, common knowledge that businesses could purchase up to R500 million of cover for business interruption, construction projects, goods in transit, material damage, money and motor losses.  To answer this question, we must distinguish between the economic and insured losses caused by the catastrophe… 

The total economic cost of such an event is usually multiples of the insured portion of the loss, and this case is no different. Sasria is an optional insurance cover that is available on commercial and personal insurance policies to give the insured protection from civil commotion, public disorder, strikes, riots and terrorism. Cover is so cost-effective that it would be highly unorthodox for an insurer or insurance broker not to include it. So, we assume that most insureds will have Sasria cover. We can also conclude that those who are insured, but do not have Sasria cover will probably be in a world of hurt, because their regular insurance will exclude cover for the special risks already mentioned. 

The following observations offer an idea of whether a business or individual could make a successful claim against Sasria following civil commotion. Does the insured have an insurance policy for the asset/s that have been damaged or lost? If no, game over. If yes, does the insured’s insurance policy include Sasria cover for the asset/s that have been damaged or lost? If no, game over. If yes, then go ahead and put in a claim with Sasria. However, your Sasria claim will still have to satisfy the terms and conditions associated with that line of cover. First and most important, the loss or damage would have to have been caused by the civil commotion… Second, you will have to prove ownership of the damaged or lost assets… And third, you will have to adhere to the insurer’s loss adjusting protocols. 

Fast-tracking claims of R50000 or less

The Financial Intermediaries Association of Southern Africa (FIA) recently distributed a media release in which they noted that brokers and insurers stood ready to assist businesses and individuals with Sasria claims. “It is important for insureds to realise that the insurance claims process following a civil commotion, public disorder, strike, riot or terrorism differs slightly from that following an ordinary loss,” said FIA President, Peter Olyott. This is because the claim is not lodged via the broker or insured to the insurer; but by the broker or insured, via an insurer, to Sasria. The good news for individuals and SMMEs affected by the unrest is that Sasria had already announced the fast-tracking of low value claims. 

The special risks insurer has advised its agents, the country’s traditional insurers, that they “may settle claims up to R50000 on damages relating to the recent events” subject to all conditions met. Claims exceeding R1 million may take longer, because assessors and loss adjusters will have to be appointed per the special risk insurer’s mandates. “The basic of conditions of insurance apply to Sasria cover in much the same way they would apply to an ordinary insurance policy”, noted Olyott. “This means that the insured may still have to prove ownerships of the goods, that large losses will have to be properly assessed and adjusted and that the sums insured on the original policy must [have been] adequate”. 

Cry the beloved country…

Sadly, over a period of less than a week, a tiny fraction of the country’s 60 million inhabitants went on an unhinged looting spree that caused massive damage to local businesses and may have knocked 0.7% from our 2021 GDP growth. And it will take years for South Africa to recover from this shameful event, regardless of how much the insurance industry pays out. 

In a recent LinkedIn post, I asked how many ‘Cry, the beloved country’ moments South Africa could possible endure? I observed that the images of looting, killing and violence being broadcast globally would reinforce negative perceptions about South Africa among investment decision makers while shattering the foundation levels of Maslow’s Hierarchy of Needs for citizens. We have witnessed, first-hand, another perfect illustration of how people become their own worst enemies.

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