South Africa’s state-owned insurance company Sasria is in talks with National Treasury for a larger bailout than the R3.9 billion ($272 million) already promised, its managing director told a parliamentary committee on Wednesday.
Sasria, the only insurer covering political violence in Africa’s most advanced economy, has suffered a sudden deterioration in its financial position after some of the worst violence in the post-apartheid era erupted in July soon after the arrest of former president Jacob Zuma.
More than 300 people died and around 3 000 shops were looted in the immediate aftermath of Zuma’s arrest, with anger over entrenched poverty and inequality fuelling the violence. The economic impact in the two worst-hit provinces of KwaZulu-Natal and Gauteng is estimated at tens of billions of rands.
“The R3.9 billion that we are talking about will not be enough on claims between R20 and R25 billion,” said Cedric Masondo, managing director of Sasria.
“The liquidity is not as big a problem for us as solvency … because we need to recapitalise the business. When we had a good balance sheet of R10 billion, the riots wiped out that balance sheet so we need to recapitalise,” he said.
Using a R20 billion claims figure, Masondo said preliminary figures suggested Sasria would need an injection of around R5.6 billion to meet regulatory solvency.
“If the claims are above R25 billion we need probably (an) additionalR 7 billion,” he said.
Last month, Masondo said Sasria would increase its premiums to cover a rise in reinsurance costs linked to the July riots.
Sasria is the latest state company to turn to government for bailouts, with power utility Eskom and national airline South African Airways major beneficiaries in recent years. The government is trying to close the tap on further handouts given the weak state of the economy.