GEOPOLITICAL INSTABILITY AND LOCAL BLACKOUTS – A DOUBLE RISK WHAMMY FOR SA COMPANIES

Leading South African risk and Insurance consultancy Riskonet Africa has warned that the country’s open and fragile economy leaves it vulnerable to demand and price factors for primary commodities as well as the way economic policies are currently implemented by the major economies.

This coupled with crippling and unending Stage Six power blackouts means South Africa’s vulnerability quotient has increased substantially. Riskonet Africa was responding to the release of two global risk reports outlining the top global risks to watch in the next decade.

The World Economic Forum ’s report lists the cost of living crisis as its number one risk, while TIME Magazine sees geopolitical factors – including the war in Ukraine and the effects of the COVID outbreak in China – as the most significant risks.

Other significant risks ranked highly in both reports include the devastating effects of climate change, the rise of disruptive technologies and cybercrime, and water stress, as well as the erosion of social cohesion in the United States.

“While South Africa will undoubtedly feel the effects of all of the risks outlined in these reports, we should be most concerned about the effects of geopolitical instability and rising inflation on our already fragile economy,” says Volker Von Widdern , Principal of Strategic Risk at Riskonet Africa.

He adds: “The cycle of increasing interest rates in the USA and Europe forced South Africa to also increase interest rates to protect the value of the Rand and to support our fight against inflation”

Von Widdern also warns that geopolitical instability and constrained budgets are likely to substantially decrease the appetite for investment in South Africa by multinational corporations.

“South Africa should consider the top risk issues in terms of its sources of business, supply chain dependencies and potential disruptions in respect of market dynamics so that it can mitigate threats to its goals and stabilize its economic models,” he adds.

Von Widdern says while South African companies need to be attuned to global risk factors, the power crisis coupled with deteriorating infrastructure rightly remains top of mind for many South companies who are feeling the negative consequences of no electricity for up to 12 hours a day. “In risk terms, this is a double whammy as managers need to consider day-to-day hardships as well as being aware of macro global issues. Clear risk management policies need to be constantly updated and evaluated as they have become the key to business survival in this time of local and global upheaval.”