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In a client note this weekend the firm notes that over the past 20 years, South Africa has experienced three major instances of violence that required extraordinary intervention. The first was the 2008 xenophobic riots, which prompted the deployment of the army to Johannesburg and other areas while refugee reception camps had to be established, including by the United Nations, as thousands of people fled their homes. Similar unrest occurred in 2015, and the third wave came in 2021.

Frans Cronje says his firm monitors three key conditions that historically aligned before each major eruption.

The first is food price inflation, which acts as a stress indicator for the poorest households. Rising staple and fuel prices, he notes, were present at the moment of each previous outbreak. The actual inflation indicator may have some degree of lag attached to it, so it is important not to wait for it to take off but rather to identify that the conditions for it to do so are already being felt in the purchasing pressure on households.

The second is cold weather, which further pressures households in vulnerable communities, particularly those living in informal settlements – where the effect of extended cold streaks is bitterly felt and no viable heating options exist. The 2008 and 2015 riots occurred in May and April, just as conditions turned colder coming out of the South African summer, while the 2021 unrest took place in July (although that timing had a Covid-19 dynamic attached to it).

The third factor is the presence of incitement to mass violence, such as anti-immigrant activism and intimidation.

In the note, Cronje said that all three circumstances are beginning to align again. Fuel and staple prices are rising faster than at any point in the past 18 months, temperatures have dropped across much of the country, and incitement activity is escalating with organised anti-immigrant activists marauding across parts of the country and engaging in xenophobic violence.

Cronje stresses that these factors are necessary but not sufficient conditions for violence. Effective law enforcement can neutralise the risk by addressing incitement and maintaining order. His firm’s current assessment therefore is that while violence is neither imminent nor inevitable at this time, investors and firms operating in South Africa should put the risk high on their radars and monitor the underlying dynamics closely, stress-testing their mitigation strategies. The firm warns that, “Should it happen, there will likely be only two or three days of warning before its sweeps across key provinces, most likely with an epicentre in Gauteng”.