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BUSINESS & FINANCE /  CHRIS JORDAN






          Natural Disasters




          and their Impact



          on the Economy





          By: Chris Jordan




           n general, fires are necessary   Fires and other natural disas-  investor sentiment rather than   the trend of the general market,
           to keep the forest floor clear   ters also have an impact on the   the potential impact on their   and actually increased by 9.8%
           of debris, remove low growing   broader economy. As investors   long term profitability, and the   following this incident. Investors
         Iunderbrush, and kill insects   became aware of the severity   share prices have subsequently   realised that the replacement
          and diseases that prey on trees.   of the fires and the potential   recovered by between 1.5%   of the damaged infrastructure
          This reduces the competition   insurance costs, the share prices   and 2%.    would increase the demand for
          for the nutrients in the soil and   of Santam and RMI dropped by              cement, and as a consequence
          allows established trees to grow   5.1% and 5.3% respectively in the   Potentially the fires will have a   the Taiheiyo Group became a
          stronger and healthier.   period from 5 – 8 June (Santam   positive impact on the local eco-  more attractive investment.
          The obvious risk is that fires get   is represented by the orange   nomy because the insurers will
          out of control, as was the case   line and RMI by the blue line in   release cash to rebuild the lost   While the impact of the recent
          recently in Knysna, Plettenberg   GRAPH 1 below).   homes and to replace furniture   fires will probably not be suffi-
          Bay and along the Eastern Cape                      and clothing etc.         cient to move the share prices of
          coast. The fires were devas-  Although the insurers are expec-                the cement producers, it should
          tating and some families lost   ting increased claims following   An earthquake off the coast of   have a positive impact on the
          everything they owned. While   these devastating events, their   Tohoku in Japan on 11 March   local economy. South Africa is
          companies and individuals   exposure is actually limited to   2011 resulted in a devastating   in the throes of a recession and
          rallied to the support of those   a fixed amount in the region   tsunami that caused massi-  it is difficult to identify oppor-
          affected in an effort to alleviate   of R100 million per incident to   ve waves to damage several   tunities that will spur economic
          their short term suffering, it is   ensure that a single disaster will   nuclear reactors in the area.   growth, so even in times of
          difficult to fully appreciate the   not result in the liquidation of   In reaction to the incident the   adversity the opportunity to
          longer term impact this may   the insurer and a loss of cover   Japanese stock market index   provide additional employment
          have on their lives. According   to those insured. The insurers   was negative, falling just over   and increase the revenue of
          to Fin24, Cape Chamber of   therefore enter into re-insurance   15% in the days that followed.   local businesses will have to be
          Commerce Chairman Jannie   agreements with specialised   (GRAPH 2)            welcomed.
          Myburgh expects the claims to   companies such as Swiss Re
          be even higher than the initial   or Lloyds. The short term dip in   The share price of the Taihei-
          estimate of R4 billion.   their share prices was therefore   yo Group, the largest cement
                                    largely the result of negative   producer in Japan, did not follow

          GRAPH 1. Share prices of Santam and RMI dropped by 5.1% and 5.3% res-  GRAPH 2. Following an earthquake off the coast of
          pectively in the period from 5 – 8 June (* Santam = orange / RMI = blue).  Tohoku in Japan on 11 March 2011 the Japanese stock market
                                                                  index was negative, falling just over 15% in the days that followed.



















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