South Africa’s social cohesion has deteriorated, posing a risk to business of a repeat of the civil unrest that cost the economies of KwaZulu-Natal and Gauteng more than R50 billion (€2.9bn) in July 2021.

This is the warning in a new PwC report released on Thursday, entitled Rebuilding social cohesion is an essential contributor to economic development in South Africa. The report focuses on how private businesses can help to rebuild social cohesion in the country.

“There is ample evidence that social cohesion has significantly deteriorated in South Africa over the past five to ten years. This has placed the country in a precarious situation of instability. People who do not have any hope for a better future draw the conclusion that those who are running the world (or those who just seem to be more fortunate) are responsible for their intolerable levels of hardship - and the fissures among different economic and social strata widen,” the report noted.

“In desperation, people are more inclined to lash out by trampling on traditional norms and rejecting institutions that society needs to flourish. Our concern right now is that many of the driving forces behind the July 2021 unrest have not improved.”

PwC noted that some factors, such as spatial planning, were structural and impossible to change over a short period, while other challenges had become tougher. For example, the number of unemployed youth (aged 15-24) has increased by another 12% to 2.8 million.

“The risk faced by South Africa at present is that the breakdown in social cohesion experienced in recent years continues on a negative trend over the short to medium term. This, in turn, heightens the risk of people increasingly expressing their dissatisfaction through non-peaceful means. For private companies, this increases operational and security risk for business activities. Physical infrastructure (buildings), supply chains, and staff safety are at risk,” PwC noted.

The company’s South Africa Senior Economist, Christie Viljoen, said there was a risk of the negative trend of the breakdown in social cohesion continuing over the short to medium term.

“For private companies, this increases operational and security risk for business activities. Our survey data shows that local business leaders are very concerned about the impact of social inequality on their businesses. At the same time, the public sector is overwhelmed, and stretched in every direction to cope with these and other challenges,” Viljoen added.

“Through this report, we also aim to deliver a message of hope. South African companies can continue to make an even more meaningful and sustainable impact on their communities by adopting the right strategy for their business and stakeholders. We believe the private sector will need to play an increasingly important role in helping the state address socio-economic challenges, specifically at the community level.”

However, financing socio-economic development interventions in the same manner as we have in the past will not achieve this. Making budget allocations for Corporate Social Investment (CSI) is insufficient to make a societal impact.

Lullu Krugel, PwC Africa ESG Leader, said modern societal expectations were that companies should be purpose-led organisations, committed to contributing towards important environmental, social and governance (ESG) goals through their influence in society.

“Purpose defines how an organisation can contribute to society, and there is growing acceptance that purpose is a commercial imperative amid evidence of a strong link between purpose-driven companies and strong financial performance. Only purpose-driven organisations can earn the trust of communities and employees, reduce social risk, and rebuild social cohesion,” Krugel said.

To address the breakdown in social cohesion at a community level, the report emphasises that firms need to adopt a comprehensive ESG approach, embedded within an organisation’s core business strategy.

“ESG is more than ticking boxes - it is about making a difference by creating sustained outcomes that drive value and fuel growth while strengthening our environment, societies and governance structures,” the report said.