News / National
Social unrest warning in South Africa
14 Apr 2025 at 12:33hrs | Views
Critical issues such as the government's overreliance on taxes and the deterioration of basic services threaten social unrest in South Africa.
Renowned economist Dawie Roodt warned that the government's overreliance on taxes is the first issue that could ignite protests in the country.
In an interview with BizNews, Roodt explained that the main problem facing the country's fiscal framework is the ruling ANC government's ideological stance.
He said that with income and company taxes being at their limit, Value-Added Tax (VAT) is the only option for the ANC government to generate revenue.
However, this would only hurt the poor, who already face significant financial strain and an extremely high unemployment rate, which could lead to social unrest.
"Ideologically, the ANC want to spend more money, not less money, because they've got all sorts of silly ideas like NHI and maybe eventually a basic income grant," he said.
According to Roodt, state spending also fuels the ANC's patronage networks. "There are many people wanting to get their hands on a contract here or a tender there and stuff like that. This is what gives the ANC life - state spending."
As a result, the only alternative for the government is to find ways to raise more revenue, but income and corporate taxes are out of the question.
"Personal income taxes, you cannot increase because we are already over that so-called Laffer curve," he explained.
"There was an increase in personal income taxes - This bracket creep is nothing but an increase in personal income taxes. So that one is just not on."
Corporate taxes are similarly maxed out. "You can't do that because our company taxes are just far too high," he said.
That leaves only one major tax instrument, which is VAT. "The only remaining significant revenue source for the state is value-added tax," Roodt said.
He warned that this approach is bad for the economy, risks deepening inequality, and would trigger social unrest because the poor will suffer the most.
Deteriorating basic services adds fuel to the flame
President Cyril Ramaphosa admits that a lack of basic services like water and inaction will have similar consequences.
Speaking at the National Water and Sanitation Indaba on 27 March, Ramaphosa said access to water is a fundamental human right enshrined in the Constitution, and the government must ensure it is protected.
However, many local water services authorities (WSAs) responsible for water provision under the Water Services Act of 1997 are struggling with old and crumbling infrastructure.
It is estimated that about R89.9 billion will be needed over the next decade to address the backlogs and repair the system.
In the face of these challenges, water tankering - the delivery of water by trucks - has become increasingly common to meet emergency needs.
While vital for upholding citizens' rights, the system has been marred by serious allegations of corruption.
Ramaphosa acknowledged the emergence of and the risks posed by so-called "water mafias" across several municipalities.
These groups reportedly sabotage water infrastructure, such as pumps and valves, to create artificial crises.
These mafias then profit by supplying water through tanker contracts, often in collusion with municipal officials.
"This dire state of affairs has driven away private sector investment in water infrastructure, although this is now slowly improving," Ramaphosa said.
He also criticised municipalities for failing to reinvest the revenue collected from water services into maintaining critical infrastructure.
In addition, he raised concerns about governance issues at water boards, some of which are under investigation by the Special Investigating Unit for fraud and corruption.
Ramaphosa warned that if immediate action is not taken, the country risks facing increased social unrest as dry taps, decaying infrastructure, and poor management at the local government level fuel public anger.
"These factors make for what is called a perfect storm," he said, adding that protests linked to water shortages are already becoming a reality.
A report by Allianz Commercial has also highlighted that civil unrest is the main concern for businesses in South Africa this year.
The German insurer found that political risks and violence have consistently ranked among the top ten global threats to businesses over the past three years.
Its latest research shows that more than 50% of companies worldwide identify civil unrest as their biggest worry, highlighting the growing frequency and duration of such incidents.
In South Africa, the concern is even more pronounced. Around 79% of South African businesses said they are worried about civil unrest, with many still shaken by memories of the widespread violence during the July 2021 riots.
Respondents said the potential impacts are severe, ranging from threats to employee and customer safety to significant business interruption losses and property damage.
Indirect effects, such as customers avoiding certain areas or companies being unable to access their premises, can also severely damage operations.
The consequences extend to the insurance industry as well. Allianz Commercial noted that insurers and reinsurers might have to rethink their coverage strategies or hike premiums to cope with the rising risk.
According to Srdjan Todorovic, Head of Political Violence and Hostile Environment Solutions at Allianz Commercial, political violence remains a pressing issue because global politics are increasingly shaped by populism, division, and blame.
Rising inequality and perceptions of corruption in political institutions further fuel the risk of unrest.
Over the past decade, major social unrest incidents, including riots in Chile and South Africa, have led to insured losses exceeding $10 billion (R191.7 billion), surpassing losses from other political violence and terrorism-related claims.
In some regions, the damage from civil unrest rivals that caused by natural disasters, while in others, the social consequences can reshape communities long after the unrest has ended.
Renowned economist Dawie Roodt warned that the government's overreliance on taxes is the first issue that could ignite protests in the country.
In an interview with BizNews, Roodt explained that the main problem facing the country's fiscal framework is the ruling ANC government's ideological stance.
He said that with income and company taxes being at their limit, Value-Added Tax (VAT) is the only option for the ANC government to generate revenue.
However, this would only hurt the poor, who already face significant financial strain and an extremely high unemployment rate, which could lead to social unrest.
"Ideologically, the ANC want to spend more money, not less money, because they've got all sorts of silly ideas like NHI and maybe eventually a basic income grant," he said.
According to Roodt, state spending also fuels the ANC's patronage networks. "There are many people wanting to get their hands on a contract here or a tender there and stuff like that. This is what gives the ANC life - state spending."
As a result, the only alternative for the government is to find ways to raise more revenue, but income and corporate taxes are out of the question.
"Personal income taxes, you cannot increase because we are already over that so-called Laffer curve," he explained.
"There was an increase in personal income taxes - This bracket creep is nothing but an increase in personal income taxes. So that one is just not on."
Corporate taxes are similarly maxed out. "You can't do that because our company taxes are just far too high," he said.
That leaves only one major tax instrument, which is VAT. "The only remaining significant revenue source for the state is value-added tax," Roodt said.
He warned that this approach is bad for the economy, risks deepening inequality, and would trigger social unrest because the poor will suffer the most.
Deteriorating basic services adds fuel to the flame
President Cyril Ramaphosa admits that a lack of basic services like water and inaction will have similar consequences.
Speaking at the National Water and Sanitation Indaba on 27 March, Ramaphosa said access to water is a fundamental human right enshrined in the Constitution, and the government must ensure it is protected.
However, many local water services authorities (WSAs) responsible for water provision under the Water Services Act of 1997 are struggling with old and crumbling infrastructure.
It is estimated that about R89.9 billion will be needed over the next decade to address the backlogs and repair the system.
In the face of these challenges, water tankering - the delivery of water by trucks - has become increasingly common to meet emergency needs.
While vital for upholding citizens' rights, the system has been marred by serious allegations of corruption.
These groups reportedly sabotage water infrastructure, such as pumps and valves, to create artificial crises.
These mafias then profit by supplying water through tanker contracts, often in collusion with municipal officials.
"This dire state of affairs has driven away private sector investment in water infrastructure, although this is now slowly improving," Ramaphosa said.
He also criticised municipalities for failing to reinvest the revenue collected from water services into maintaining critical infrastructure.
In addition, he raised concerns about governance issues at water boards, some of which are under investigation by the Special Investigating Unit for fraud and corruption.
Ramaphosa warned that if immediate action is not taken, the country risks facing increased social unrest as dry taps, decaying infrastructure, and poor management at the local government level fuel public anger.
"These factors make for what is called a perfect storm," he said, adding that protests linked to water shortages are already becoming a reality.
A report by Allianz Commercial has also highlighted that civil unrest is the main concern for businesses in South Africa this year.
The German insurer found that political risks and violence have consistently ranked among the top ten global threats to businesses over the past three years.
Its latest research shows that more than 50% of companies worldwide identify civil unrest as their biggest worry, highlighting the growing frequency and duration of such incidents.
In South Africa, the concern is even more pronounced. Around 79% of South African businesses said they are worried about civil unrest, with many still shaken by memories of the widespread violence during the July 2021 riots.
Respondents said the potential impacts are severe, ranging from threats to employee and customer safety to significant business interruption losses and property damage.
Indirect effects, such as customers avoiding certain areas or companies being unable to access their premises, can also severely damage operations.
The consequences extend to the insurance industry as well. Allianz Commercial noted that insurers and reinsurers might have to rethink their coverage strategies or hike premiums to cope with the rising risk.
According to Srdjan Todorovic, Head of Political Violence and Hostile Environment Solutions at Allianz Commercial, political violence remains a pressing issue because global politics are increasingly shaped by populism, division, and blame.
Rising inequality and perceptions of corruption in political institutions further fuel the risk of unrest.
Over the past decade, major social unrest incidents, including riots in Chile and South Africa, have led to insured losses exceeding $10 billion (R191.7 billion), surpassing losses from other political violence and terrorism-related claims.
In some regions, the damage from civil unrest rivals that caused by natural disasters, while in others, the social consequences can reshape communities long after the unrest has ended.
Source - businesstech
