This is the last of three posts exploring the business resilience challenges multinational corporations are likely to face when operating in South Africa over the next five years.
South Africa demonstrates serious weaknesses across most indicators of potential unrest, such as labour force participation, corruption perception, and government effectiveness. A period of increased civil unrest in South Africa is, therefore, highly plausible in the short to medium term.
2019 already set a 21st-century national record for the number of protests and riots in South Africa: Armed Conflict and Location Event Data (ACLED) recorded 1,500, equating to approximately 4 a day. The fallout from COVID-19 is likely to intensify this already volatile situation: GDP shrank by 7% last year; unemployment jumped to a record high of 32.5% in the fourth quarter of 2020; and systemic weaknesses in service delivery, such as water and sanitation services, have been brought to the fore.
Foreign-owned businesses are more likely to be directly disrupted by service delivery protests and those related to unemployment. Foreign-owned businesses are often directly targeted as a proxy for frustration at municipal-level government failures, or indirectly impacted by road blockages that disrupt operations.
Likewise, as foreign businesses are often the main employers in local municipalities, they become the focus of protests by disillusioned youth who cannot find employment, of official and unofficial workers forums (often masquerading as ‘Unions’), and by contractors who are disgruntled by procurement decisions.
As the local government elections scheduled for 27 October 2021 approach, we will likely see a spike in protests at the municipal level, posing heightened operational and security risks to foreign-owned businesses.
Moreover, as the number of active social media users in South Africa increases, we may see an acceleration in the number of protests over the next five years. Social media creates a forum for sharing and exploiting discontent and enables citizens to coordinate and form networks. This was demonstrated by the #ZumaMustFall campaign, which led to an anti-government protest at the Union Buildings in Pretoria in December 2015, and more recently, the #PutSouthAfricansFirst movement organised a series of anti-migrant protests via social media.
South Africa has a long history of civil unrest being used to air grievances and so the risk of disruption to foreign-owned businesses from protests will remain. Nevertheless, the failures protesters want to tackle are a result of an inability to successfully implement policy changes and of poor political leadership, and so this is a trend that is likely to continue as long as the ANC’s infighting thwarts its ability to govern effectively.
This is the final post in our business resilience in South Africa series. To explore the other factors our analysts think pose the greatest challenges for foreign-owned businesses investing and operating in South Africa over the next five years, see our posts on crime and political stability.
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