South African Businesses on Alert for Social Unrest as Elections Loom

South African companies are gearing up for potential social unrest in the lead-up to the 2024 national elections, as recently stated by leading pulp and paper manufacturer Sappi in their 2023 integrated annual report. Their apprehensions reflect a broader concern in the business community, particularly with a stagnating economy and intensifying political activities as the polls approach.

This sentiment is not isolated, with Astral Foods, one of the country's major food production companies, also expressing concern over the potential for increased social instability both in the near future and extending beyond the election period. The company's chairman, Theuns Eloff, pointed to a stalled economy, high unemployment, and rising living costs as factors feeding into the public discontent. Economic growth has been lethargic, and with interest rates and inflation remaining elevated, consumers are witnessing their purchasing power erode, compounding the already difficult socioeconomic conditions.

Sappi's report acknowledges that the constant threat of social unrest is spurred by widespread dissatisfaction with service delivery. In July 2021, the company experienced a significant R220 million production loss when civil unrest led to temporary shutdowns of their facilities in KwaZulu-Natal. More recently, they had to deal with closures due to flood damage in 2022. The interruptions in operation highlighted not only the direct impact of unrest but also how vulnerable businesses are to disruptions stemming from social tensions.

Moreover, Sappi outlined the shift in community expectations, where local populations within a 30-kilometre radius of its operations are increasingly looking toward private companies to address social issues — roles traditionally fulfilled by the government. This dynamic places additional strain on private sector entities, affecting their reputation and community relationships.

Significantly, governance expert Dr. Sam Koma has indicated a strong link between upcoming elections and a ramping up of service delivery protests, with projections from Municipal IQ pointing to a record number of such events in 2023. Koma emphasizes that poverty, unemployment, and inequality are high; when the basic needs of communities are not met, and their voices remain unheard, protest becomes a last resort. He also pointed out that the South African Police Service (SAPS) is under-resourced, with less than half the ideal operational strength for public order policing available, potentially exacerbating responses to protest action.

These warnings come at a time when investor confidence is fragile, and businesses are seeking stability to foster growth and development. It underscores the importance of a proactive approach to managing socio-political risks and reinforces the need for effective dialogue between the government, the private sector, and the communities to mitigate the looming threat of unrest. As the election year draws closer, it remains to be seen how these dynamics will unfold and what steps will be taken to navigate the potential turmoil ahead.