Johannesburg - South Africans have only just begun to realise in the last two months that the global financial crisis will affect them directly.
This is the view of Andreas Molck-Ude, CEO of the Middle East and African operations for global reinsurer Munich Re, who says if decisive action is not taken by leaders of the G20 developed and emerging economies at their meeting this weekend, the world is "only at the beginning of its problems".
Munich Re is one of the world's largest reinsurance businesses; these businesses ultimately insure the insurance sector.
Germany-based Molck-Ude says there has been a definite change in attitude from people: "When I came to South Africa two months ago, people were talking about the country being isolated from the fallout from the crisis; this time, the reality seems to be sinking in and South Africans have sobered up to the fact that it will affect them."
G20 meeting
Molck-Ude believes that people should be focused on events at the G20 summit taking place in Washington over the weekend. The summit brings together leaders of developed and major developing nations to discuss an action plan to deal with the global financial crisis.
"The G20 needs to restore consumer trust in the financial systems - if it fails to do this, then we could only be at the beginning of the financial crisis for consumers," he said.
A factor that concerns him is the task of getting all the nations represented to agree on a way forward.
Retrenchments a worry
With the problems experienced by the world's largest insurer AIG, questions have been asked whether other major insurance firms in South Africa could be under threat. AIG is the beneficiary of the single biggest rescue package for a firm at $153bn, after it almost went under because of credit derivatives problems.
Molck-Ude believes this is highly unlikely, as the problems experienced by AIG were related to its investment activities. However, both in South Africa and abroad retrenchments are becoming a concern.
He said: "From what I've heard since arriving here, threats of retrenchments in primary sectors such as minerals, mining and steel could pose a threat."
Continued weak commodity prices would also discourage firms from further investment in Africa.
With lending from banks having dried up and little appetite for the corporate debt market, Molck-Ude says that the reinsurance sector has provided firms with an alternate method to access capital through reinsurance treaties.
He said that companies would now seek higher levels of risk management and mechanisms when assessing and managing risk capital.
-Fin24.com