Social Risk Index suggests South Africa is set for a period of civil unrest

Social Risk Index suggests South Africa is set for a period of civil unrest

South Africa is likely to experience a period of political and social unrest once the COVID-19 pandemic finds some or other form of resolution and things go back to normal, however that may look.

This is no attempt to fear-monger, but rather the conclusions of a recent study that assesses social risk in terms of a ranked index of the world’s countries and how likely their citizens are to engage in political and social protest.

What is the Social Risk Index?

The study, conducted by insurance company Euler Holmes, is designed to “identify which countries are particularly vulnerable to systemic social risk, including events such as anti-government protests and other incidents that could become game-changers for politics and policymaking, as well as business and investment decisions”.

Their study does not claim to predict actions, but rather seeks to evaluate the vulnerability of a country to sudden spates of protest and volatility so as to better inform investors about how safe their money is.

“The SRI neither measures the probability of a social crisis nor predicts the next social unrest event. It is rather a vulnerability indicator that focuses on the longer term structural determinants of social risk,” they said.

The vulnerability of each country on the Social Risk Index (SRI) is determined using the following factors:

  • Real GDP per capita growth trend: We compare the average annual growth in the last three years to the average growth prior to that since 2000. This approach reflects that the potential for social risk can also rise in high-income EMs (such as Chile or in the GCC) and AEs if the (relatively high) level of economic welfare is deteriorating or being perceived to deteriorate.
  • 2.     Labor force participation: The higher the share of the labor force in the working-age population, the lower the potential for discontent. This indicator is better than the unemployment rate, which is measured very inconsistently across countries.
  • 3.     Income inequality measured by the GINI index.
  • 4.     Public social spending on education, health and social protection, which reflects the importance of social policies and networks in a given country.
  • 5.     Political stability and absence/presence of violence, reflects together with
  • 6.     Government effectiveness and
  • 7.     Corruption perception how effective a government is perceived at doing its job.
  • 8.     Trust in government indicates the share of people that trust their national government.
  • 9.     Vulnerable employment is made up of own-account workers and contributing family workers who are less likely to have social security coverage and to benefit from other forms of social protection.
  • 10.  Imports of goods as % of GDP reflects together with
  • 11.  Currency depreciation the scope for imported inflation, notably for foodstuffs, which is a typical trigger for social discontent.
  • 12.  Fiscal revenue as % of GDP captures a government’s capability to respond with fiscal stimulus to crises.

To make the data comparable across indicators, each of them was rescaled from 0 to 100 with 0 denoting the highest risk and 100 the lowest. Then the SRI was calculated as the average of the sub-indicators, thus also ranging between 0 and 100.

How did SA score?

So how did South Africa fare? Well, we came out with a fairly high score, ranking 79th of the 102 countries that were assessed, meaning that a period of unrest is a highly plausible outcome.

“In Africa, almost all of the selected 17 countries in our sample score badly on our SRI, with Mauritius (rank 52) being the only country with a SRI just above 50. Nigeria is at the bottom of our table with a SRI of 19.8 and South Africa is ranked 79th out of 102 countries with a SRI of 41.1, reflecting weaknesses across almost all sub-indicators of the index,” they said.

“Moreover, COVID-19 is likely to intensify the already high of systemic social risk in Africa in the near future, owing to very weak health care combined with currently low commodity prices, which reduce the capability of governments to respond with fiscal stimulus to the sanitary crisis.”

“All in all, it cannot be ruled out that a number of public protests occur across the continent from the second half of 2020 to 2021.”

No stranger to protest

Of course, these assessments are only as good as the actions that do or don’t precede them, and therefore the degree of civil unrest South Africa undergoes is entirely up to the populous.

South Africa is no stranger to protests, and this week alone we have seen protest action in solidarity with the murder of George Floyd, as well as several service delivery protests in the Western Cape last week.

 

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