Election unrest worries South African SMEs

Many South African small businesses are concerned that the imminent risk of economic turbulence and protest action during the election season could impact their operations.

This was revealed in the recently released Q4 2023 Small and Medium Enterprises (SME) Confidence Index, which said the 2024 elections are one of the most monumental and contested in South African history.

“Several shifts in the electoral arena, including the introduction of independent candidates to the voting roll, the unprecedented large number of political parties contesting the elections as well as the uncertain majority of the ruling party, have added to the national air of uncertainty,” the report said.

It found that the social climate ahead of the May elections is cause for concern for small businesses surveyed in the Q4 2023 SME Confidence Index.

The SME Confidence Index is conducted by specialist SME financier Business Partners.

For this survey, it posed a new question to its constituent of respondents, which is made up of local small business owners. 

Respondents were asked whether they were concerned that the imminent risk of economic turbulence and protest action during the election season would impact their operations.

Almost half of SME owners (49%) answered yes. About 33% of the respondents believed the elections would bring much-needed change.

Business Partners’ executive general manager of impact investing, David Morobe, said that elections can be disruptive by their very nature.

He explained that elections add a degree of uncertainty and pose some risk to small businesses as investments by governments, the private sector and even SMEs themselves are postponed in the run-up to elections.

South African Special Risk Insurance Association (SASRIA) CEO Mpumi Tyikwe recently warned that the uncertainty surrounding South Africa’s upcoming elections could risk a repeat of the 2021 July riots, and businesses should prepare accordingly.

SASRIA specialises in covering losses from civil unrest and other ‘freak’ events like flooding. The company was overwhelmed by claims from the 2021 July Riots. 

Following the destructive 2021 riots, SASRIA went “belly-up” but was saved by a R22 billion bailout from the National Treasury.

The July riots led to an estimated loss of R50 billion, R31.5 billion of which SASRIA covered.

The riots involved about 18,000 claims – seven times the normal average SASRIA would typically get in one year. 

SASRIA’s concerns were shared by the team at Allianz Commercial, which said that security and stability are major concerns in many countries having elections in 2024. 

In particular, they said South Africa’s national election on 29 May has the potential to be a flashpoint for political violence, with it set to be the most fiercely contested election in the country’s history. 

Allianz said the ‘super-cycle’ of 2024 elections, with nearly half the world going to the polls, threatens localised unrest as well as broader geopolitical tension. 

As unrest can now spread more quickly and widely, thanks in part to social media, financial costs from such events for companies and insurers are mounting. 

“So many elections in one year raise concerns about the fueling of polarization, with tensions potentially playing out in heightened civil unrest,” said Srdjan Todorovic, Head of Political Violence and Hostile Environment Solutions at Allianz.

Allianz said the South African elections in May are a potential flashpoint for localised unrest and political violence. 

“South Africa suffers from high unemployment, particularly among the young, and significant wealth inequality,” says Etienne Cheret, Regional Practice Group Leader, Crisis Management France and Africa at Allianz Commercial. 

“Crime, corruption, and blackouts have caused widespread frustration. There is already a high level of disillusionment among the population, so we are watching the situation very closely.”