Friday, October 11, 2013
Strike-linked damages at all-time high
11 Oct 2013
Strike-related damages have soared as state insurer Sasria gets its biggest claim ever - R70-million in damages after farmworker strikes in Cape Town.
Collateral damage: Strikes at Medupi resulted in claims of R10-million. (Madelene Cronjé, M&G)
The state-owned insurance company, the South African Special Risks Insurance Association (Sasria), recorded in the past year the largest insurance claim ever to hit its books — along with a spike in both the severity and frequency of claims — thanks chiefly to protracted labour action.
A R70-million claim, the largest in its history, was received for a warehouse that was damaged during the farmworker strikes in the Western Cape, Sasria's managing director, Cedric Masondo, told the Mail & Guardian in an interview this week.
The insurer recorded a 135% increase in the severity of claims and a 91% hike in claim frequency, according to its annual report, with claims rising to more than R507-million from about R207-million in 2012.
Sasria provides insurance for extraordinary or special risks such as civil unrest, terrorism and labour action. It was formed in 1979, thanks to the reluctance of private-sector insurers to cover political risk, and its cover was extended to include "nonpolitical perils", like labour disturbances, in 1998.
The spike in claims comes as South Africa's industrial relations climate sours, and with business and industry warning of the negative effects this is having on South Africa as an investment destination.
Since 2010, Sasria has seen a steady increase in claims related to service delivery protests and strikes, Masondo said. But most of the claims — about 80% — are due to labour action.
"The employees are angry," said Masondo. "It is still too early to say this is a trend but we are worried at the increases."
Other large claims came from strikes that took place at the Medupi power station construction site. Claims of about R10-million in all were received.
One was for about R6-million after damage to equipment; the others were smaller claims, Masondo said.
All the claims were submitted by Eskom subcontractors working on the project, he said.
Increases in claims also came from the mining sector, including one for about R20-million.
Historically, the industry has a high number of strikes but over the past year they have been increasingly disorganised and protracted, and there has been a noticeable increase in unprotected strikes, Masondo said.
Extending beyond the "strike season"
According to the financial statements, the total claims for three major events last year included the mining strikes (R53-million), the truck drivers' strike (R65-million) and the Western Cape farmworkers' strike (R160-million).
Masondo said that, last year, strikes extended beyond the "strike season", usually between April and September.
The company received claims into November and even as recently as January, Masondo said.
The severity of claims has increased because of inflation and also because of the size of the claims themselves.
Masondo said there are often more service delivery protests than labour strikes but the related claims tend to be lower because they often occur in townships where property values are lower.
Risks to the company's outlook include external threats, such as a terrorist attack, particularly following the recent attack on the Westgate mall in Kenya.
A major concern
Domestically, continued increases in the protracted, disorganised and unprotected nature of recent strikes are a major concern, he said.
To mitigate these risks, Sasria and its shareholder, the treasury, are spreading the message that strikes are protected by law but damage to property should be avoided, he said.
The company also purchases a lot of re-insurance and regularly reviews its risk profiles and the rates it charges.
"The nature of our business is that the risks are unpredictable and have big impacts," Masondo said.
The past year proved that Sasria has an important role to play.
Despite recent developments, the company has not increased premiums for the past four years.
Company's rates decline
"But if the risk profile continues to deteriorate, we may have to look at that."
The company's rates have declined by 70% since apartheid rule, which shows that, despite current challenges, things are vastly improved.
Sasria is aiming to roll out more cover for small and medium-sized enterprises, especially in the townships, where businesses are often at the forefront of service delivery protests, Masondo said.
But the effects of labour unrest are threatening the confidence of organised business.
The chief executive of the South African Chamber of Commerce and Industry, Neren Rau, said that although it had not noted increased levels of violence during strikes in 2013, risks such as damage to property are "always a concern".
The chamber is very worried about the increased levels of inter-union rivalry and intimidation, particularly of workers who do not want to strike, he said.
No-work, no-pay principle
The chamber wrote to the minister of labour last week asking the government to address this issue.
Another key concern is that, during strikes, workers are subject to the no-work, no-pay principle but union leaders continue to draw salaries and do not feel the same effects that their members do.
Business Unity South Africa special adviser Raymond Parsons said it appears that, overall, the strikes in 2013 were less violent than last year.
But the rise in claims is tangible evidence "of the extent to which such losses ultimately reflect in the balance sheets of the businesses concerned" and add to the cost of doing business, Parsons said.
"While collective bargaining in its very nature embodies reciprocal obligations on both employees and employers during a strike, discipline among workers at such a time is something that lies mainly in the ambit of labour unions."
The organisation "remains deeply concerned that, unless the current adverse industrial relations situation can be reversed soon, the negative effects on investor confidence and on South Africa's economic performance will escalate," he said.
Progress on investigations
Michael Laubscher, chairperson of the Hex River Valley Table Grape Association, said, although he knew of arrests made during the strikes, he is not aware of the progress of any investigations or prosecutions.
The region includes De Doorns, the epicentre of the strikes.
The South African Police Service in the Western Cape did not respond to questions about the number or progress of criminal cases opened as a result of the strikes.
The spokesperson for the National Union of Mineworkers (NUM), Lesiba Seshoka, said the union condemned illegal action.
Unions have to ensure there is no violence or criminal activity during industrial action and the unions should work closely with law enforcement agencies to ensure this.
"If any of our members act outside of the law, disciplinary action must be taken," he said.
This includes expulsion from the union. If members "behave criminally", they "must be prosecuted" and take responsibility, Seshoka said.
Although union leaders feel the effects of strikes less than their members, it is workers who call them, he said.
"Normal strikes are voted for by members and leaders only represent what workers tell [them]," he said.
He dismissed claims of inter-union rivalry, saying it is merely evidence of ill-discipline or internal interpersonal problems.
He pointed to recent peaceful strikes in the gold sector in which both the NUM and Association of Mineworkers and Construction Union both had members.
Page Boikanyo, spokesperson for the department of labour, said the government supported the right to strike but condemned violence or unlawfulness.
According to information provided by South Africa Police Service in the Western Cape, over 170 criminal cases were opened as a result of the strikes across the Brederiver Valley, Witzenberg and Langeberg municipalities. Charges ranged from public violence (53) to malicious damage to property (58) to intimidation (21). Thus far 81 cases had been referred to court, a further 40 were with the senior public prosector, following investigation according to SAPS.
Each police station had designated investigation officers to deal with farm workers’ strike related cases.
*This story has been updated to include responses sent through by the South African Police Services, which arrived too late to be carried in the print version.