The on-going riots and labour disruptions in the platinum industry is causing South African businesses to continually feel the impacts of strikes, which is damaging economic growth, and in turn negatively impacting local businesses within the mining sector, as well as those inadvertently involved.
According to Annelie Smith, Corporate Executive at Risk Benefit Solutions (RBS), the risks related to strikes and riots – across all sectors – are steadily growing as the number of strikes in South Africa continues to increase. Business owners need to ensure that they are covered for the various risks that strikes and riots may bring about for their business, such as damage to property and loss of income due to interruptions caused by labour unrest.
Compared to a few years ago, when strikes were erratic, these incidents are steadily becoming more constant within the country.
The 2012 Annual Industrial Action Report by the Department of Labour, released late last year, revealed that strike activities increased by approximately 48% during 2012. A total of 99 strike incidents were recorded in 2012, and of these, 45 were unprotected.
One such way for businesses to protect themselves from strike-related risks is by making use of cover provided by Sasria, a state-owned short-term insurance company which has a mandate to provide specialised risk cover for physical damage caused by riots, strikes, terrorism, civil commotion and public disorder to corporate / commercial and individual policyholders.
Many businesses have short-term insurance solutions in place protecting them against catastrophic perils like fires, storms, earthquakes and other risks, however, damage to property caused both by politically-and non-politically motivated acts of destruction is excluded from these policies. Many businesses may not know that this standard exclusion is a global practice and applies to all insurance policies.
Reiterating the increasing need for strike-related risk cover is Sasria’s Integrated Report 2013, which revealed an increasing trend in claims frequency. The report revealed a 91% increase in claims frequency, driven primarily by labour strikes, as well as an increase in claims severity of 135% for the period ending 31 March 2013.
The trigger for Sasria to cover an instance is based on the direct damage to a business property, as a result of a strike or riot. For example, should a business premises be set alight by rioters, Sasria would cover the damage to the property, as well as the on-going costs requiring payment during the period, such as rates & taxes, loans and high purchase agreements for example. However, should a strike take place near the property, resulting in the business ‘shutting down’ its operations temporarily, and sending staff home as a result of intimidation, there is no direct damage to the property and therefore the instance will not be covered by either the property or the Sasria policies, despite the business suffering a financial loss as a result of the business being interrupted.
The type of cover offered by Sasria is specialised, and it is therefore important that business owners consult an insurance broker to fully understand the possible risks that a company may potentially be exposed to. Due to a common misconception of what Sasria covers, many claims have in the past been rejected and left clients infuriated.
While Sasria provides cover in receipt of the damages to an extent, it does not provide full gross profit cover. Sasria does however offer various solutions to take into account the varying requirements business may have wherein companies can purchase a combination of standing charges or uninsured working expenses together with net profit cover only.
Seeking expert guidance will ensure that businesses have sufficient cover in place for the possible losses caused as a result of a strike. For instances, alternative “top-up” solutions can be obtained from various international global insurers. These solutions are easily available and should also be explored by businesses.
The rising occurrences of riots and strikes highlight the growing need for local business to protect themselves financially from the possible risks associated with strikes. Given the challenges in the marketplace due to industrial action, workplace disruption and protests, strikes and riots need to become a permanent part of a business’ risk management plan..