THE IMPORTANCE OF THE IMPACT OF POLITICAL RISK FACTORS IN SOUTH AFRICA

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Abstract

Political risk factors often impact negatively on the financial results of an enterprise, industry, geographical region or an entire country. In severe cases they may even lead to financial disasters. Previous research (by Essel) identified 10 specific political risk factors which are common to emerging market economies. As South Africa is a developing country with an emerging market economy, these 10 political risk factors should also be present in this country. This paper focuses on the importance of the impact of political risk factors on an agent’s total annual claims amount when underwriting political risk insurance in South Africa. The objective of this research paper embodies the improvement of financial decision-making by a particular enterprise, industry, geographical region or country operating in an emerging market economy, pertaining to the importance of the impact of political risk factors. A literature study as well as an empirical survey was done to achieve the study’s objective. The conclusions of this research should also be valuable to other enterprises, industries, geographical regions or countries which operate in an emerging market economy.

Keywords: Breach of Contract, Confiscation, Creeping Expropriation, Currency Inconvertibility, Nationalisation, Non-honouring of Government Payments, Non-violent Civil Unrest, Political Risk Factors, Terrorism, Violent Civil Unrest, War

How to cite this paper: Essel, R., & Mostert, F. J. (2013). The importance of the impact of political risk factors in South Africa. Risk Governance and Control: Financial Markets & Institutions, 3(1-1), 74-81. https://doi.org/10.22495/rgcv3i1c1art1