Sasria will no longer provide cover for riot damage if the power grid collapses

8th May 2023 By: News24Wire

 Sasria will no longer provide cover for riot damage if the power grid collapses

Photo by: Reuters

South Africa's special risk State-owned insurer will no longer provide cover for damage to property caused during riots and protests that could break out in the event the country's electricity grid collapses.

The decision by the South African Special Risks Insurance Association (Sasria) follows moves by SA's big short-term insurers who have pulled, or plan to remove, grid failure cover from their policies this year.

From 1 June, all Sasria policies will not indemnify people and business from "any loss, damage, cost or expense, directly or indirectly caused by, arising out of, in any way or to any extent contributed to by, or in connection with electricity grid failure". This exclusion applies to "any riot, strike or public disorder (including civil commotion, labour disturbances or lock-outs)" that are directly or indirectly caused by the grid failure.

It will also not cover problems arising from disruptions to water supply, telecoms systems or sewerage, and losses from rotting food.

Sasria secured a cash injection of R22-billion from the government in the wake of the July 2021 unrest that left over 350 dead, nearly 2-million people unemployed and more than R50-billion "wiped off our economy" in what President Cyril Ramaphosa called the moment SA stared into the "heart of darkness". Despite the injection, Sasria was still projected to suffer a loss of about R26-billion that financial year.

Its "grid failure exclusion" comes after the reinsurance market urged Sasria to "eliminate our coverage for claims stemming from electricity grid failure".

SA has experienced unprecedented levels of load shedding over the past year and half, hitting Stage 6 numerous times, with analysts anticipating higher levels as winter rolls in.

Nedbank chief economist Nicky Weimar said in April that they had been running scenarios of total grid failure, and he believed that it is more than likely a reality.

If the grid collapsed, it would take Eskom, in a best-case scenario, around a week to restore power. However, it is anticipated that it will most likely take several weeks if it happened. There would be a cascade of problems affecting supply chains, transport, banking, fuel supply, food security, and personal and business security. Protests and riots are also anticipated. 

Netcare said in March that it will offer some of its staff and families shelter, in the "unlikely, but not impossible" event on a collapse. Mining companies have also been drawing up contingency plans.

Richard Stewart, Sibanye-Stillwater's chief regional officer for southern Africa, said there were technical considerations related to a blackout, like how to get people out of the mines safely, but there was "a very real crime aspect", too, he said.

"What happens when we have a blackout, and suddenly there are no resources for people for 10 days while we turn the grid back on? Where do they go? What is going to happen during that period? It's an incredibly frightening thought."