Ignore the soothsayers, consult an actuary

William Saunderson-Meyer on Sasria's assessment of the risks facing SA under a failing state


If you’re looking for dispassionate analysis, ignore the soothsayers: the politicians, the academics, the commentators. All are burdened with emotional and ideological baggage that leans them either left or right.

For a straight-up answer on prospects and probabilities, go seek out an insurance sector actuary. They keenly understand the market penalties of being either too optimistic or too pessimistic. No one is better equipped to give you as icily calculated and evenhanded an answer. ___STEADY_PAYWALL___

Sasria (South African Special Risk Insurance Association) — the state-owned enterprise (SOE) that underwrites against civil commotion, public disorder, strikes, riots and terrorism for all individuals, businesses and government entities that own assets in this country — this week gave its unvarnished assessment of future odds. South Africans should plan their future, its CEO told a parliamentary committee, with the expectation of a rerun of the July 2021 civil unrest in the next half dozen or so years.

Sasria was set up by the local insurance sector with the backing of the apartheid government in the wake of the explosion of violence and destruction that started in Soweto in July 1976. As the unrest spread countrywide, it eventually became clear that this was not a once-off event. 

In the face of such enormous losses arising from politically motivated acts of civil disobedience and unrest, it became impossible to obtain or provide cover. The situation was untenable and, simply put, Sasria was set up by the National Party government to insure the uninsurable, with the State acting as final guarantor. 

It was a brilliant and innovative move. To this day, South Africa is one of only a handful of countries that provides affordable coverage against political peril. 

Sasria became the ultimate political safety net. It not only kept many spooked multinationals from exiting during the turmoil and destruction of the next couple of decades — sabotage, killings, arson and bombings — but gave new homegrown enterprises the shelter they needed to take root and grow. This may be a rough neighbourhood but, at a fair price, the insurers would cover your back, financially speaking. 

Despite a half dozen years of relative neglect in the immediate afterglow of the 1994 “rainbow miracle”, Sasria quietly thrived. It is one of the very few SOEs that the African National Congress inherited from the era of white rule that they haven’t driven into the ground. 

Sasria, which is legislatively mandated to “research and investigate” any risks “that can be considered to be of national interest”, made the startling but virtually unnoticed prediction during a parliamentary presentation. Briefing members of the Select Committee on Finance in Parliament, Sasria CEO Mpumelelo Tyikwe said South Africa was “likely, possibly, going to have another [July 2021] event within the next six to seven years”.

In the Gauteng and KwaZulu-Natal riots of two years ago, Sasria suffered a direct loss of R24bn. The unrest, which President Cyril Ramaphosa described as an attempted insurrection, also cost at least 360 lives and R70 billion in knock-on economic damage, as well as two million lost jobs.

Earlier this year, the Treasury made a cash injection to Sasria of R22bn to restore its solvency and settle an accumulated total of R32bn worth of claims following the 2021 looting. Sasria has now swung into a R3.6bn profit before tax and, Tyikwe told the parliamentarians, is concentrating on building its balance sheet in anticipation of the next unrest.

The 2021 unrest had been a defining moment for Sasria, said Tyikwe. “What was built since 1979, 42 years of work, was literally destroyed in 10 days … Sasria needs some time to build up its reserves so that we can respond to an event of similar magnitude to that which we experienced in July 2021.”

Sasria’s approach is eminently sensible. However, one wonders if the SOE’s executives fully comprehend the scale of the problem. South Africa is a country doubly at risk. Sasria should not only gauge the potential scale of violence perpetrated against the State but also factor in the enfeebled condition of the State after almost three decades of incompetent ANC governance. 

This was highlighted in this week’s partial release by Parliament of the results of an investigation into the New Year’s Day 2022 razing by fire of the National Assembly complex. The findings reveal staggering levels of public service incompetence and institutional paralysis, despite being heavily redacted in the briefing in order not to prejudice disciplinary proceedings against five implicated officials, as well as the criminal case against the perpetrator. 

The iconic building, erected in 1884 was destroyed by a single person, one Zandile Mafe. Despite a psychiatric assessment to the contrary, Mafe insists that he is perfectly able to follow court proceedings and is eager to stand trial. The case against the self-confessed arsonist, who made no serious attempt to evade arrest, is still limping along and resumes again next month.

What is undisputed is that Mafe was undetected in the Assembly and its adjoining administrative building for more than a day, in spite of causing havoc and setting off dozens of alarms. There were almost 26 hours between him gaining entry and finally setting fire to the pile of boxes that started the conflagration.

The Secretary of Parliament, Xolile George, told the media that the fire could have been prevented or its extent at least limited, had critical but routine measures been in place. 

It’s clear from the investigation that Parliament did not meet minimum security standards, never mind those demanded of a complex designated as a National Key Point. There was no head of Parliamentary Protection Services, with the post remaining unfilled since 2015; to save money, PPS officers were not deployed at night, on public holidays and at weekends

The parliamentary investigation found a range of systems and maintenance failures that “significantly contributed to both the security breach and the failure to prevent and contain the fire”, including the height of the perimeter fence — which was supposed to have been upgraded in 2004 but wasn’t — and a complete absence of perimeter monitoring.

The entire precinct was a fire hazard because the Department of Public Works and Infrastructure had failed to maintain the building and its systems. There was “pervasive non-compliance with fire regulations and requirements”, including smoke detectors, exit doors, fire alarm panels, emergency notification systems, sprinkler systems, and the remote radio system. 

With PPS completely absent at the time of the fire, all security was in the hands of four SA Police Service officers, it’s previously been reported. The two people in the control room — one of whom was shown on camera to be sleeping, while the other had headphones on — did not notice Mafe’s activities on CCTV nor did they respond to the multiple alarms. Following a SAPS disciplinary process, the full extent of their punishment, it appears, has been to be “redeployed” to other duties.

In short, none of the systems worked. No one has been held responsible and likely no one will. 

In the wake of the arson, the government promised accelerated repair, with work on the National Assembly to start in May 2022 for completion by the end of 2023, at an estimated cost of less than R1bn. The most recent official estimates are that the work, which has just started, will take at least four years and that the cost will be at least R2bn. 

Last year, during his State of the Nation address, Ramaphosa said that “for many, what happened in Parliament speaks to a broader devastation in our land.” For once, the president is right. 

And it’s this great incalculable — the true scale of the destruction of capacity and morality and accountability in South Africa — that the insurance actuaries most need to factor into their calculations. As do all of us. 

Follow WSM on Twitter @TheJaundicedEye