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OPINION - The economic impact of civil unrest

2021-07-15  Staff Reporter

OPINION - The economic impact of civil unrest
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Fear resulting from violence and destruction can hinder economic activity directly through an increase in transport costs, capital flight or postponing of investments. 

The severe civil unrest in South Africa has broken out across the country, with momentous incidents in Durban and Gauteng, respectively. It is estimated that more than 30 trucks were torched. The effect of the civil unrest has caused serious damage to many businesses. South Africa and Namibia enjoy warm and fraternal relations that are characterised by regular and increasing interaction at all levels. This means what is good for South Africa is good for Namibia.

The civil unrest in South Africa affects many businesses, which suffer financial losses, leading to further high unemployment. Namibian’s market will also be affected, and we might experience shortages of products. Most of our products are imported from South Africa. 

The Namibian economy is closely linked to South Africa, with the Namibian dollar pegged one-to-one to the South African Rand. The impact of a civil unrest on the economy depends on two key dimensions: its duration and intensity. Being pegged to the Rand has both advantages and disadvantages. For Namibia, we are exposed to all the external factors. 

With Namibia’s current narrow industrial and export base, it is going to be difficult to withstand the external shocks. These are the challenges that we will face if civil unrest is prolonged in South Africa. That country’s main exports to Namibia consist of vehicles, machinery, pharmaceuticals, processed food, clothes, cement, petroleum and petroleum products as well as iron and steel. A significant percentage of Namibia’s exports go through South Africa. We are in the same boat. 

Civil unrest can increase the risk perceptions of investors by increasing expectations about the potential for future outbreaks and instability. Thousands of protestors looting caused losses over N$100 000 000. 

This is not good for Africa at large. South Africa is regarded as Africa’s main hub. It is also critically important to address societal inequities immediately and effectively, as their significance cannot be overstated. While communities work to address these issues, corporations and other business owners should also prioritise their ability to continue operations. Those in areas impacted by civil unrest may have suffered property damage and business income loss, and should use insurance
to the maximum extent to help their businesses navigate this unprecedented period. 

Coverage for losses stemming from the current unrest may be found in restoring property, business interruption and extra expense insurance. This type of loss often has a greater impact than actual physical damage to property. Business interruption and contingent business interruption coverage are designed to protect businesses from losses stemming from unavoidable interruptions in their daily operations.  

In summary, it is clear that preventing civil unrest, or at least containing its economic damage, is critical for long-term development, and thus understanding when and how recovery works is a priority. God bless Africa

*The views expressed in this opinion piece are
those of Joseph K Sheehama, and are in no way related to that of his employer or affiliations.

2021-07-15  Staff Reporter

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