SA Special Risk Insurance Association (Sasria)’s delays in paying multimillion-rand claims for the rebuilding of food cold storage infrastructure damaged in the July violence are spiking food prices.
Bearing the brunt of rising costs, say food price experts, are the poor.
The wave of violence in KZN and Gauteng saw R50bn worth of cold storage facilities, warehouses and shops — many located near impoverished areas — destroyed.
Julie Smith, senior researcher at the Pietermaritzburg Economic Justice and Dignity Group, said because of the destruction, the poor were now forced to spend more money travelling further to buy their groceries, with a shortage of products, especially low-cost meats such as polony and frozen chicken, driving up prices.
The organisation conducts SA’s largest monthly food basket price survey.
Smith said since August the cost of a basket of food consumed by the poor, especially those living in KZN, had soared.
In Durban, prices increased by R161 (3.9%), while in Johannesburg and Pietermaritzburg they rose by R143 (3.2%) and R128 (3.2%) respectively.
“In October SA’s average food basket costs increased by R98 (2.3%). This is on top of the August and September increases. The increases are because there are still food shortages and additional food transport costs which are pushing up prices.”
Insurance Claims Africa [ICA], which assists the insured negotiating settlements from insurers, is preparing to head to court to force Sasria to honour commitments to businesses devastated by the violence.
Sasria’s insurance covers businesses and people who sustain losses from political riots and mass action.
Among the food supply businesses severely affected are Durban’s cold storage companies. The city, which has some of SA’s biggest cold storage facilities, lost more than 40% of them.
The ICA and the Meat Producers Association said delays in Sasria’s payouts for rebuilding damaged infrastructure in Durban meant food importers were forced to move products to cold storage facilities in Johannesburg and Cape Town, before transporting them back to Durban when warehouse and shop shelf space became available.
Ryan Woolley, CEO of ICA, said they represented 100 businesses fighting Sasria to have it settle their claims.
Among ICA’s clients is Meister Cold Storage, Durban’s largest cold storage facility, which stores 22,000 tons of frozen foods.
Woolley said Sasria’s delays in paying claims or rebuilding damaged infrastructure, such as cold storage facilities, meant food products were now transported thousands of kilometres across SA unnecessarily.
“Delays have caused the prices of low-cost meat products to rise. The poor are suffering because of bureaucratic bungling.”
Woolley said while they understood that Sasria was overwhelmed by the number of claims, “they, and insurance companies which administer Sasria’s policies, must come to the party”.
Woolley said the bureaucracy was immense.
“Sasria requires five different documents before paying claims. These include copies of the policy; proof the policy was bought from Sasria; proof of paid premiums; a loss adjuster’s report outlying the extent of damage and explaining loss; and then, for claims over R5m, they want the underlying insurer [insurance company] to provide a report on the four documents.”
He said of 20 clients’ claims he recently queried, Sasria only had all the necessary documents for four of the companies.
“When we went to the underlying insurers they said they had handed all the documents over. When we went to Sasria they said they had not received the documents. Someone is lying.”
He said if Sasria did not have the money they should say so.
“Clients would understand and could seek finance elsewhere.”
He said they were preparing to go to court to seek a declaratory order compelling Sasria to honour its commitments.
Woolley said payments made to date had been random.
“Is it because the smaller guys are not shouting loudly enough?”
Julie Smith said the impact from the violence on poor households was immense.
“Combine the impact of the violence with rising electricity and fuel costs and it leaves millions facing dire situations.”
Peter Gordon, CEO of the Meat Producers Association, whose members produce processed meats, said the riots severely impacted food production and storage companies.
“Forty percent of Durban’s cold storage capacity has been destroyed.
“Importers must now route their consignments to Cape Town or Johannesburg for cold storage before transporting them back to Durban for manufacturing and sale.”
Sasria spokesperson Andiswa Madolo said they were following all due process to expedite claims.
“We have allocated the most experienced and senior team in our claims department to deal with those [ICA] claims and have made interim payments.
“We are confident our ICA engagements will not lead to litigation.”
She said Sasria had received more than 13,000 claims and paid out more than R7bn.
“In total we expect to pay out R30bn. Our target is to pay between R12bn and R15bn by the end of November.”
Madolo said they expected all claims not requiring rebuilding to be fully paid and finalised within the next six months.
“Sasria has started the rebuilding process. Rebuilding claims will take longer depending on the times it takes to rebuild malls, shopping centres or warehouses.”
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