Rolling blackouts imposed by the ailing state-owned entity, Eskom, pose the biggest risks to businesses in South Africa for 2024, according to the Allianz Risk Barometer.
The barometer released yesterday revealed that critical infrastructure blackouts (load shedding) have emerged as the number one risk for businesses in South Africa for the second consecutive year, highlighting the severe impact of power outages and the failure of essential infrastructure such as ports, railways and roads on the economy and businesses.
“The closely interlinked peril of energy crisis has climbed to the fifth position, up from sixth place in 2023. Cyber incidents and business interruption continue to hold the second and third spots, respectively,” the report said.
Thusang Mahlangu, the CEO of Allianz Commercial South Africa, said: “South Africa’s business community must remain vigilant in the face of critical infrastructure blackouts. The persistent threat of power outages and infrastructure failures poses significant challenges to businesses, disrupting supply chains, and impacting the overall economy.
“The report underscores the urgent need for investment in infrastructure resilience and the development of contingency plans to mitigate the potential consequences of blackouts. By proactively addressing these risks, businesses can enhance their ability to withstand disruptions and ensure continuity of operations.”
Globally, cyber incidents such as ransomware attacks, data breaches and IT disruptions are the biggest worry for companies in 2024, according to the Allianz Risk Barometer.
The closely interlinked peril of business interruption ranks second, globally.
Natural catastrophes (up from sixth position to third year-on-year), Fire, explosion (up from 9 to 6), and political risks and violence (up from 10 to 8) are the biggest risers in the latest compilation of the top global business risks, based on the insights of more than 3 000 risk management professionals.
Allianz Commercial CEO Petros Papanikolaou said: “The top risks and major risers in this year’s Allianz Risk Barometer reflect the big issues facing companies around the world right now – digitalisation, climate change and an uncertain geopolitical environment. Many of these risks are already hitting home, with extreme weather, ransomware attacks and regional conflicts expected to test the resilience of supply chains and business models further in 2024. Brokers and customers of insurance companies should be aware and adjust their insurance covers accordingly.”
Large corporates, mid-size and smaller businesses are united by the same risk concerns – they are all mostly worried about cyber, business interruption and natural catastrophes.
However, the resilience gap between large and smaller companies was widening, as risk awareness among larger organisations had grown since the pandemic, with a notable drive to upgrade resilience, the report noted.
Trends driving cyber activity in 2024
Cyber incidents (36% of overall responses) rank as the most important risk globally for the third year in a row – for the first time by a clear margin (5% points).
Cyber incidents retains its second position in South Africa.
It is the top peril in 17 countries and regions, including Nigeria, Uganda, Kenya, Mauritius, Africa and the Middle East, Germany, India, Japan, the UK and the US.
A data breach is seen as the most concerning cyber threat for Allianz Risk Barometer respondents (59%) followed by attacks on critical infrastructure and physical assets (53%).
With regard to the recent increase in ransomware attacks – 2023 saw a resurgence in activity, with insurance claims activity up by more than 50% compared with 2022 – ranking third (53%).
“Cybercriminals are exploring ways to use new technologies such as generative artificial intelligence (AI) to automate and accelerate attacks, creating more effective malware and phishing. The growing number of incidents caused by poor cybersecurity, in mobile devices in particular, a shortage of millions of cybersecurity professionals, and the threat facing smaller companies because of their reliance on IT outsourcing are also expected to drive cyber activity in 2024, “ Scott Sayce, the global head of cyber, Allianz Commercial said.
Business interruption and natural catastrophes
Despite an easing of post-pandemic supply chain disruption in 2023, business interruption (31%) retains its position as the second biggest threat in the 2024 survey.
Business interruption retained its third position in South Africa and ranks in the top five risks in Ghana, Kenya, Senegal, Uganda and Africa and the Middle East.
This result reflects the interconnectedness in an increasingly volatile global business environment, as well as a strong reliance on supply chains for critical products or services.
Improving business continuity management, identifying supply chain bottlenecks, and developing alternative suppliers continue to be key risk management priorities for companies in 2024.
Natural catastrophes (26%) is one of the biggest movers at third position, up three positions.
2023 was a record-breaking year on several fronts.
It was the hottest year since records began, while insured losses exceeded $100bn for the fourth consecutive year, driven by the highest-ever damage bill of $60bn from severe thunderstorms.
In South Africa, the impact of natural catastrophes was particularly severe, propelling it from seventh to fourth place in the global ranking.
The country experienced devastating floods that resulted in casualties and extensive damage to homes, businesses and critical infrastructure.
Given conflicts in the Middle East and Ukraine, and tension between China and the US, political risks and violence (14%) is up to the eighth position from 10th.
The risk moved down one place to 6 in South Africa.
2024 is also a super-election year, where as much as 50% of the world’s population could go to the polls, including in Ghana, Mauritius, Senegal, South Africa, India, Russia, the US and UK.
Dissatisfaction with the potential outcomes, coupled with general economic uncertainty, the high cost of living, and growing disinformation fuelled by social media, means societal polarisation is expected to increase, triggering more social unrest in many countries.
Below is the top 10 risks to business in South Africa: