Supply Chain Vulnerabilities: What South African Businesses Need to Know for 2025

South African companies face an increasingly challenging business environment when it comes to supply chains. Critical infrastructure is frequently cited as South Africa’s top business risk and for good reason.

The threats are both unique to our local context and part of global trends. Load shedding interrupts production and compromises temperature sensitive goods. Port congestion extends delivery times and drives up costs. The Rand’s volatility affects pricing for imports and exports. Rail network limitations create transportation bottlenecks. Meanwhile, cyber criminals increasingly target vulnerable supply chain systems.

 

The Koekemoor’s Cautionary Tale

 

The Koekemoor’s “HoutWerk” business in Stellenbosch had built a reputation for exquisite yellowwood furniture sourced from a sustainable plantation in Mpumalanga. Their troubles began when load shedding damaged their supplier’s timber treatment facility, delaying shipments by weeks. “Just a temporary hiccup,” Drikus assured customers while Marie frantically reworked production schedules.

 

Then disaster struck. Heavy rains caused their warehouse roof to collapse, right after they had received an emergency shipment of premium wood that depleted their cash reserves. When their insurance assessor arrived, he delivered news worse than a Springboks defeat: “Your building was insured for R4 million, but the replacement cost is R8 million. The Underinsurance Clause applies—you’ll only get 50% of your claim paid.” Drikus stared blankly. “But the call centre agent never explained this Underinsurance thing when initiating the policy.” The assessor sighed. “They should have advised you to factor in inflation, professional fees, rebuilding costs and VAT into your sum insured. Drikus, you are with the wrong insurer, you needed professional risk advice.”

 

With their cash tied up in unworkable timber, their Business Interruption cover was insufficient for the extended recovery period and only half their property claim was paid. The Koekemoors faced a R5.2 million shortfall.

 

At the Winelands Business Forum, Marie shared their cautionary tale: “We thought saving on premiums was smart business. Now when someone mentions ‘cheap and easy insurance’, Drikus nearly knocks over his koeksisters”

 

The Koekemoors survived, but learned an expensive lesson: a comprehensive risk strategy must address both supply chain vulnerabilities and proper insurance cover, arranged by a professional risk advisor, or you could end up paying double or worse should disaster strike.

 

Understanding What Can and Cannot Be Protected

 

When facing these challenges, it’s important to recognize that some supply chain risks can be transferred through insurance, while others cannot be insured and require different approaches, for example:

 

Geopolitical tensions – Insurers do not cover trade disruptions caused by changing international relations or trade policies, as these events involve intentional decisions by governments, rather than accidental occurrences. Insurance fundamentally works on the principle of covering accidental events. Additionally, the potential scale of losses from geopolitical shifts would exceed the financial capacity of the insurance industry

 

No Physical Damage Events – South African insurers generally explicitly exclude events that don’t have a physical trigger like pandemics, as these events are “systemic risks” or “non-particular risks” where too many policyholders claim simultaneously. The insurance model relies on spreading risk across diverse policyholders who don’t all claim at once. When an event like a pandemic affects all businesses simultaneously, this fundamental principle breaks down, making the risk uninsurable at commercially viable premiums.

 

Building a Comprehensive Supply Chain Protection Strategy

 

A strong approach to supply chain protection combines both insurance and practical risk reduction:

 

Document all critical suppliers and distribution channels – This mapping process often reveals hidden dependencies and single points of failure. Many companies discover that while they have diversified their direct suppliers, these suppliers may share common sub-suppliers, creating unexpected vulnerability.

 

Supplier diversification – Establish relationships with multiple suppliers for critical components, ideally located in different geographic regions and operating under different regulatory frameworks. For example, a manufacturer dependent on imported electronic components might develop relationships with suppliers in both Asia and Europe to mitigate regional disruptions.

 

Transportation redundancy – Develop alternative shipping routes and transportation methods for critical supplies and finished products. A company that typically relies on Durban port might establish contingency arrangements through Cape Town, with pre-negotiated rates and capacity agreements.

 

Strategic inventory management – Maintain calculated buffer stocks of critical materials based on lead time, criticality and storage costs. This isn’t about reverting to inefficient “just in case” inventory models, but rather strategically increasing stock levels for items where disruption would cause disproportionate damage.

 

Local sourcing initiatives – Develop relationships with South African suppliers where feasible to reduce exposure to international shipping delays and currency fluctuations. This often requires investment in supplier development, but creates resilience against global disruptions.

 

Power continuity systems – Implement comprehensive backup power solutions beyond basic generators, including uninterruptible power supplies for sensitive equipment, solar installations with battery storage and load shedding schedules integrated into production planning.

 

Supply chain visibility technology – Implement real time tracking systems that provide alerts when shipments deviate from expected timelines or conditions. These systems can identify problems early enough to implement contingency plans before disruptions affect operations.

 

Contractual protections – Negotiate supplier agreements that include specific performance requirements, communication protocols during disruptions and equitable sharing of unexpected costs. Well structured contracts often can provide financial protection where insurance cannot.

 

Review Your Supply Chain Insurance Protection

 

Even the most resilient supply chains remain vulnerable to unforeseen events. Comprehensive insurance cover provides essential financial protection, particularly in the following areas:

 

Business Interruption covers reduction in gross profit losses from insured operational disruptions. A qualified risk advisor is a necessity as they are highly skilled in advising on key risk areas including, the setting of sums insured, Indemnity Periods and the required cover nuances for your business

 

Contingent Business Interruption is specific insurance extensions when key suppliers or customers are affected. Ensure your business interruption coverage includes named critical suppliers and that these extensions match your actual dependencies. Key Customers can also usually be insured, but cover is generally not available for Customers outside the borders of the RSA

 

Cyber Insurance can provide cover for digital supply chain attacks

 

Cargo Insurance safeguards goods in transit across complex logistics networks, both local and international

 

Credit Insurance, also known as credit or export credit insurance, protects your accounts receivable against nonpayment due to insolvency, default or political events, ensuring compensation when buyers can’t pay. This protection is valuable in volatile markets or during economic instability, covering both domestic and international transactions. TCI helps maintain cash flow, mitigate financial losses and empowers companies to expand into new markets confidently, offering competitive payment terms without risking their bottom line.

 

Address Uninsurable Supply Chain Risks

 

Where insurance cannot provide protection in the South African market, implement targeted strategies:

 

Geographic diversification – Distribute your supplier base across multiple countries and regions to limit exposure to localized disruptions. This approach helped many South African businesses maintain operations during COVID-19 when different regions implemented restrictions at different times.

 

Vertical integration – Consider bringing critical processes in house where feasible to reduce dependency on external suppliers. While this may increase operational complexity, it can significantly reduce vulnerability to external disruptions.

 

Financial reserves – Maintain dedicated contingency funds to address uninsurable disruptions. Unlike general business reserves, these funds should be specifically allocated for supply chain recovery with clear activation criteria.

 

Scenario planning – Develop detailed response plans for specific uninsurable events like regulatory changes or geopolitical risks. These plans should include trigger points, response teams and action frameworks.

 

Collaborative industry approaches – Join industry associations or create partnerships with complementary businesses to share resources during disruptions. These collaborative arrangements can provide access to materials, transportation or production capacity when normal channels are disrupted.

 

Digital transformation – Implement technologies that increase operational flexibility, such as production systems that can quickly adapt to alternative materials or components when primary supplies are unavailable.

 

Insurance and Risk Management – Use insurance as a complement to proactive risk management, rather than a standalone solution.

 

Contract Review – Regularly review contracts with suppliers to ensure adequate liability coverage is in place

 

 

A Risk Advisor’s Perspective

 

“In today’s volatile environment, supply chain resilience isn’t just about risk management—it’s about in depth risk analysis and insurance risk transfer. South African businesses that invest in understanding and protecting their supply chain networks consistently outperform those that don’t, especially during disruptions.”

Matthew Clothier, Risk Advisor, Chadwicks

 

Solution

 

A skilled professional insurance risk advisor is best equipped to analyze the intricacies of your supply chain risk, including:

 

Risk Assessment: Comprehensive evaluation of your insurable vulnerabilities, examines supply chain specific risks and identifies risks that can be insured. It is intended for businesses with complex supply chains, manufacturing, retail, logistics and international trade

 

Insurance Gap Analysis: A review of all existing insurance policies to find coverage gaps, ensuring there are no unintended exclusions, limits or missing coverages

 

Intelligent Insurance Solutions: Designing custom insurance solutions to fit specific risks and needs. Structures the best suited insurance cover based on identified risks and your unique risk profile

 

Moving Forward with Confidence

 

The businesses that handle supply chain disruptions most effectively aren’t necessarily those with the largest budgets. Rather, they are the ones who systematically identify their vulnerabilities, implement targeted protection strategies and secure appropriate financial safeguards against remaining risks. By taking a balanced approach that combines insurance solutions with practical risk reduction, your business can substantially decrease its vulnerability while positioning itself for sustainable growth even in uncertain times.