By Eamonn Ryan
A panel discussion was hosted at the GCCA Africa Risk & Insurance seminar on the topical subject of ‘Security considerations and lessons learned from the Durban riots’.
The panel featured Bruce Sanday, CEO of Sequence Logistics; Christopher Nulliah, chief logistics officer of Etlin International; and Renier du Preez, CEO: Digistics, all three companies being owners of distribution centres (DCs) affected by the KwaZulu Natal riots during July 2021. The session was moderated by Carlos de Mendonca, general manager: Crossberth Cold Stores, who also serves on the GCCA African Advisory Council and the risk management committee and was appointed as the vice chairman of the GCCA risk management committee in December 2022.
The purpose of the session was to share experiences and see what lessons have been learned and what can in future be implemented should anything like that ever arise again.
Lizelle van der Berg, director, GCCA Africa opened the panel discussion: “Security in South Africa has become one of the major risks for companies in South Africa. The General Risk & Insurance Seminar hosted by the Global Cold Chain Alliance was initiated by the GCCA Africa Risk Management Committee with content covering major risk topics. It is great to see the industry working together on mutual challenges and that we have formed a community which did not exist four years ago – we have come a long way in a short time.”
De Mendonca posed the questions:
Q: What was your first reaction when you realised what was taking place?
“Our first reaction was disbelief,” said Du Preez. “We always had a plan catering to the potential loss of a single DC, and the realisation now was that this contingency plan we had in place for just such a situation was first going to be tested as something we had to get stuck into and get through – but there was also the fear it might be more than one DC, as our Johannesburg DC was also at real risk. The biggest pressure point was the need to keep the customer top of mind throughout the process.”
Q: How did your company communicate with employees?
Nulliah described the scene: “Luckily mobile phones still worked when it came to evacuating our staff and trying to get some control over the site. Once the staff were off site, we set up an SMS and WhatsApp group. When it was safe, we called meetings with the police and property security because the area was still volatile for a long time in Hammarsdale.”
Some of the businesses reported having formal communication channels with their offices in Johannesburg or Cape Town which took care of communication with staff as well as customers and large suppliers.
Q: Were there any outside companies you could contact for assistance at this time of crisis?
“We needed to clean up our premises and get waste off site,” noted Sanday, “But couldn’t find a company able to help. We eventually located one based in Dubai that operates a business in South Africa. On top of that, our own people often used their personal vehicles to take away waste to a landfill site we found still open and operating on a skeleton staff. Cleaning up was the biggest challenge initially, along with replacing damaged and stolen equipment. For instance, we needed to replace computer equipment which has been destroyed when the building burned – and many local IT suppliers were themselves destroyed or looted.
“We sent various teams around the city to source computer equipment and many people wouldn’t let those teams into their various business precincts. Those were the important lessons we learned: to both work closer with local communities as part of our emergency plan; as well as to establish back up service providers in our vertical supply chain in case in future our primary service providers were in the same crisis as ourselves.”
Q: What do you wish you had done differently?
The panel agreed that given the scale of the catastrophe, few contingency plans could really have prevented the looting – but things could have been done differently post the event.
Nulliah emphasised the need as far as possible to not lose control of the site. “The moment you lose control of the site it becomes a free-for-all for everybody. Precautions should include minimally reducing visibility from the outside – because there are often people on the outside observing the premises. In fact, we were aware of the threat a week before through our security provider and got in additional armed security. Even that wasn’t sufficient to deal with the 80 or so people that invaded our premises come nightfall. We now have armed guards at the entrances to each of our locations and have generally upgraded security and communication.
Other sites quantified the scale of infiltration as “hundreds or even a thousand”.
“We debated whether to put armed guards on site,” said Du Preez, “and decided it might be perceived negatively among public and our customers to have shooting at people for stealing food when they are hungry. We opted not to have armed guards on site, who may be put into the position of having to use their weapons to defend their lives. In terms of handling the situation once people had entered our DC, one lesson we learned from the crisis was to pour palm oil on the floor of our premises and in such ways make it more difficult for them to get the product out of our store. I also would have wished with hindsight we had maintained closer communication with our core suppliers.”
Sanday recommended that new warehouses being built in the future do so in boomed off business parks away from the local community, and that “Everybody in the park uses the same security as this gives improved access to facilities like riot control and sealing off the entire area to keep rioters at a further distance.”
Q: How did the insurance process go?
The consensus was that insurance worked well and they simply followed the usual process – but claims had to be submitted early. “If you were in the first 10% you were guaranteed early pay out,” said Du Preez. “We received 100% of our claim quite quickly, though it has since cost us in an increase of our annual premium. I think people who got their claims in later may have had a wait.”
Sanday said his company managed their claim themselves through a broker who dealt directly with assessors – to the value of about half a billion rand. “We had most of our claim formulated while the building was still burning. For anyone buying insurance at the moment, it costs several times what it did a year ago. Furthermore, some local underwriters may not provide full cover – requiring one to look offshore. Given the scale of this incident, I would recommend policyholders study the fine print and that they look carefully at the indemnity period, as cleaning up a site after such an incident can take many months – and building from scratch can take 12 months or longer.”
All three said the insurers had not effected an extraordinary change to policy after the event, but confirmed premiums became more expensive. Du Preez recommended all policyholders conduct a detailed risk assessment, and thereafter decide whether to self-insure or go through a third party.
Nulliah in turn recommended policyholders pay attention to their renewal process and maintain a detailed asset register.
Q: When getting facilities back up and running, what were the timelines and challenges?
Cleaning up site was relatively quick for most, though recovering from the long-term damage and loss of turnover took as long as a year. Nulliah said it took about four days to recover the site, primarily the clean-up which was performed by staff into recycling skips. Damage to vehicles and equipment required contractors to do repairs, as well as replacing computer equipment.
Sanday said operationally they were back up within a week for customers, but to re-establish all KZN took a full year, as the affected site was completely burned and contaminated. “We were in fact fairly lucky in that we’d just started building a second facility the work on which was preliminary enough to change plans and expand on that site – otherwise we would never have recovered in decent time.”
“A crisis team took control of site on Friday and we were operational by next Thursday from alternative sites – because the impact for us was only in the centre of town,” Du Preez noted. “But to get sales back to normality took seven to eight months, as many of our customers experienced damage to premises that took them a year to recover from.”
Q: What are your top business continuity recommendations for future crises?
“A company’s risk assessment needs to accommodate every possible scenario and to have contingency plans for each – as the subsequent KZN floods further demonstrated. These scenarios must
be drilled and reviewed annually,” Du Preez said.
Nulliah added: “Regarding the looting and rioting, I would recommend perimeter walls five or six meters high around the complete facility with highly visible access and crowd control. Have an emergency plan as to how to deal with a crisis situation.”
In turn, Sanday emphasises the importance of having a business continuity plan in case of loss of more than one location. They lost their site in KZN and he explained that there had also been rioting in Gauteng and it would have been a quite different scale had that site also been affected. “When it comes to insurance, when calculating how much cover is needed and how long an indemnity period to select, one should consider the potential for delays in finding contractors and other suppliers such as steel. When selecting new locations carefully consider the proximity to impoverished communities rather than just convenience and price.”
The consensus was that there was a high level of coordination among the rioters. It was well thought out – warehouses stocking refrigerators were looted first and only then was food looted to fill those refrigerators.
Finally, leadership is vital. Visible leadership underpinned our success, said Du Preez. “We got on a plane and flew down to coordinate activities and lead from the front. That freed the local team to concentrate on managing the staff.”
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