Article written by Thabo Twalo (Chief Underwriting Officer – Santam Broker Solutions)
Protecting your business
Starting a small business in South Africa can be both exciting and daunting. Small and Medium Enterprises (SMEs) play a major role in the South African economy. Making up 98% of businesses and employ an estimated 50% to 60% of the country’s workforce across all sectors. When natural and social disasters strike communities, small businesses take the brunt of the economic impact as witnessed with COVID19, the Kwazulu-Natal floods and social riots and looting that took place in 2022.
In a world that is changing rapidly, it is critical that the owners and operators of SMEs prioritise risk mitigation not only to protect themselves but also as a means of protecting the economy. In this kind of environment, knowing how to navigate the complex nature of risk is a vital part of any businesses’ plans to remain future-fit.
Why do SMEs need business insurance in South Africa?
Part and parcel of mitigating one’s risks in the current landscape means understanding what risks affect your business and what insurance solutions are available and appropriate to protect your specific business. These risks include:
Property insurance – Your business property, including buildings, equipment, and stock, is vulnerable to damage from theft, fire, floods, and other unforeseen events and disasters.
Commercial property owners in South Africa must be well informed when taking out property insurance to ensure that they are not underinsured at claims time. Often, buyers take out property insurance with their bank or bond originator to the original bond value – not the true replacement value. Therefore, it’s important to properly value a property once the purchase is completed and to continuously value it.
Business interruption – Unexpected events such as fires and natural disasters can interrupt your operations, leading to lost income and an inability to pay your expenses.
Liability claims – A third-party claim against your business for damage, injury, or negligence can be costly, both financially and reputationally.
Cyber threats – Cyber-attacks are on the rise in South Africa and can result in data breaches, financial losses, and reputational damage.
Many South African SMEs have fallen victim to cyber-attacks. According to the 2022 SHA Risk Review, one in three South African SME respondents had suffered a cyber-attack as follows: malware 30%, phishing 26%, ransomware 25%, denial of service 13% and theft of funds 13%. And what’s more concerning is that 53% of SMEs that fell victim to ransomware attacks did not recover their data. According to the 2022/2023 Santam Insurance Barometer Report, cybercrime has increased to 48%, up from 36%.
Employee risks – Your employees are exposed to risks such as work-related injuries, illnesses, and accidents that could lead to liability claims.
Legal risks – Your business is subject to various laws and regulations that could result in legal disputes or regulatory fines.
Choosing the right type of business insurance depends on your industry, business operations, and risk exposure. An experienced insurance broker can help you assess your risks and recommend the best coverage for your business.
Santam is an authorised financial services provider (FSP 3416), a licensed non-life insurer and controlling company for its group companies.