Grid failure in South Africa: is there a disconnect between the boardroom and the risk office in 2023?

July 10, 2023

The latest risk review of JSE Top 40 companies reveals electricity blackout concerns are not a principal risk for the majority of our biggest enterprises.

 

By Alan Arguile, Senior Consultant at Aprio Credence

Despite multiple South African corporates publicly stating in recent months that they were doing contingency planning for a total electricity grid failure scenario, just a third (33%) of South Africa’s biggest companies have electricity supply concerns as a principal risk on their most recent published risk registers.

In contrast, sourcing and retaining the right skills for their business appears to be a far bigger concern for leading South African corporates, with 60% of JSE Top 40 enterprises identifying human capital challenges as a principal risk.

This is just one of the findings of Aprio Credence’s fourth annual survey of the principal/key risks published in JSE Top 40 companies’ integrated annual reports.

While fears of a total grid failure in South Africa appear to have declined in recent weeks with reassurances from Eskom and electricity supply experts that such a catastrophic event is highly improbable, multiple South African corporates have publicly stated in recent months that they have invested heavily in preparing for an electricity blackout scenario.

So why is this Boardroom concern not reflected more deeply on the most recent risk registers of the JSE Top 40 companies? There could be many reasons for this, but it is interesting to note that all three of the priority workstreams that Business for South Africa (B4SA) has recently committed to supporting government in addressing – energy supply, transport and logistics, and crime and corruption – don’t feature as a principal risk on the majority of JSE Top 40 companies’ published risk registers.

Only 15% of SA’s biggest corporates – including 13 mining companies – referenced infrastructure and freight rail as a risk, while just one in four of these leading companies (26%) referenced corruption/financial crime/fraud or similar crime as a principal risk. Water supply – another B4SA concern – only features on the risk registers of 20% of the biggest listed companies.

What is right at the top of the risk registers then? It’s not a surprise that cyber risk retains its number 1 position as the most prevalent risk for SA corporates (a principal risk for 75% of the JSE Top 40 companies), with regulatory risk the second most prevalent concern (63%).

Climate change is slightly up from last year’s review, moving from 45% to 53%, while ESG is down 7% from last year to 30% of the JSE Top 40 companies articulating ESG as a principal risk. And pandemic concerns linger for 20% of these companies, with pandemic risk going from 70% two years ago, to 40% last year, to one in five companies still listing it as a principal risk in their most recent reporting.

And finally, this year’s research revealed a new entry into the universe of close to 80 different risks referenced by our 40 biggest companies. Artificial Intelligence (AI) featured as a principal risk for one financial services company. Is this going to be the biggest climber in our 2024 risk review?

To find out more about the findings of the Aprio Credence annual JSE Top 40 risk review, please contact Aprio Credence CEO, Esme Arendse at esme@aprio.co.za