Written by Coenraad Bezuidenhout
South Africa undoubtedly has a complex risk environment, but one in which a nuanced approach can yield great resilience for impact investors according to Nicola Comninos. Comninos, who is Chief Risk Officer at leading SA fintech Purple Group and Vice President at SA’s Institute of Risk Management (IRMSA), shared her expertise at the recent Europe-Africa Impact Investing Summit that took place in Cape Town South Africa.
South Africa's complex risk landscape requires a collective commitment to resilience, innovation, and social impact. By aligning investments with the country's priorities and collaborating across sectors, impact investors can play a pivotal role in fostering positive change and contributing to South Africa's prosperity. Key actions that impact investors can undertake to build resilience in their projects include:
Collaborative Engagement: Collaborate with both public and private sectors to address systemic risks and challenges effectively. Initiatives driven by business leaders can play a pivotal role in driving change.
Prioritize Innovation: Seek innovative solutions to mitigate risks and seize opportunities. Embrace renewable energy, affordable housing, and small business support as avenues for impact-driven investments.
Proactive Risk Management: Shift from a reactive to a proactive risk management approach. Focus on addressing root causes rather than merely listing risks.
Opportunity Mindset: Adopt an opportunity-focused mindset when tackling challenges. Reframe issues as opportunities for positive change and societal impact.
Social Impact: Invest in initiatives that contribute to social impact, narrowing disparities and enhancing the quality of life for all South Africans.
The South African government's top priorities comprise of energy security, fighting corruption and stimulating economic growth. And to be sure, the prospects for realising these imperatives are often imperiled by a spectrum of risks, including the National Grid failure, economic collapse linked to corruption, cyber risks, unemployment, and livelihood issues.
Risk professionals have raised the spectre of a “polycrisis” in which these converging risks could result in comprehensive systemic failure or a failed state. However, the country also presided over pockets of tremendous excellence which could be leveraged to present that.
South Africa is beset by growth falling short of the necessary 5% to address a 32.6% joblessness rate and a 4.7 trillion-rand debt. National treasury aims to raise capital from the private sector through increased weekly auctions. Positive developments include more progressive private energy generation regulations, entrepreneurial activity in the energy space, the availability of affordable housing, and secured loans. However, systemic risks persist, as seen in rail utility Transnet's losses and energy utility Eskom's energy issues.
Strategic and collaborative efforts are essential to navigate this multifaceted risk landscape. South Africa’s top 100 business executives have identified political instability, economic collapse, national grid failure, and systemic public infrastructure failure as the top four risks requiring immediate attention. They have underscored the need for greater public-private cooperation to address these challenges, with private sector giants like financial services CEO Adrian Gore and minerals and investment entrepreneur Patrice Motsepe at the forefront.
“The pivot here is clear”, she said. “Businesses can no longer operate solely on profit-centric models. They must consider societal issues and broader impacts on environmental sustainability, aligning their missions with the welfare of the communities where they do business.”
But of course, while South Africa has its own peculiar challenges, its risk landscape has not been shaped in a vacuum. Commencing with a view from the World Economic Forum’s Global Risks Report, she acknowledged short-term concerns centre around social risks, particularly the cost-of-living crises, but that longer term risks are heavily skewed towards environmental fragilities.