Political uncertainty globally will have ripple effects on Africa, primarily through impacts on commodity prices and global economic sentiment.
While the early months of 2017 have seen improved prices for the commodities on which many southern African economies rely, longer term economic sentiment is more mixed. Meanwhile, governance improvements and the embedding of democratic practices and norms will be tested by pockets of instability as succession battles take place across the region.
While technological advances will generate capital-intensive production, eroding low-skill jobs and employment gains, cyber-attacks are advancing in nature, specifically in South Africa. Businesses will become increasingly vulnerable until the impact of cyber risks on their operations and reputations is as well understood and prevention and crisis management practices are in place. These are some of the key themes from the annual political and business risk forecast “RiskMap 2017”, published by Control Risks, the global business risk consultancy.
George Nicholls, Senior Partner for Control Risks in Southern Africa, comments:
“2017 will be known as the year of uncertainty. Nationalistic and protectionist reforms by US President Donald Trump, the impact of Brexit on the European markets and succession battles in key southern African states will lead to strategic uncertainty for business.
The catalysts to international business – geopolitical stability, trade and investment liberalisation and democratisation – are facing erosion. The commercial landscape among government, private sector and non-state actors is getting more complex.”
Disruption
US trade relations, migration into Europe, the debate over Brexit, as well as the ongoing crisis in Syria all combine to crowd out African issues from the global agenda. Aid levels from traditional donors are likely to stagnate at best, with the effects most acutely felt in fragile states, which remain reliant on budgetary support.
The new US administration’s agenda is likely to focus engagement with the continent on a narrower set of issues around security cooperation and countering violent extremism. We expect initiatives such as Power Africa, the President’s Emergency Plan for AIDS Relief (PEPFAR) and the African Growth and Opportunity Act (AGOA), which has been benefitted the textiles and garment industries in southern and eastern Africa, to come under increased scrutiny. While the AGOA legislation runs until 2025, renegotiations on any possible future extension would commence while President Trump is in office and, given public comments to date on much more lucrative trade agreements, renewal seems difficult. On the flipside, a significant trade dispute between the US and China within the next two years could see manufacturing industries benefitting from US companies diverting investment from China into “friendlier” jurisdictions that can offer abundant low-cost labour supply.
Brexit-effect
Meanwhile the Brexit (-negotiations) will in the long-run lead to a continuation of the relative decline of European powers’ influence in Africa. The UK will still retain cultural and trade links through the Commonwealth, but outside the EU bloc, it will likely be more reliant on its own diplomatic channels than going through the EU delegations. This will especially apply where the UK has fewer historical ties such as Cote d’Ivoire, Senegal, Angola and many smaller francophone or lusophone countries.
With Brexit, the influence of the UK’s Department for International Development (DFID) on the development agenda is likely to change. DFID has been influential over the past 15-20 years in setting a progressive agenda for EU development aid, not least through a commitment to spend 0.7% of GNP on overseas development aid. The fact that the UK is one of the few countries in the world to meet this target and has enshrined it in legislation underlines the role the country has played to date. Whether that continues under new leadership and beyond is now seriously in doubt.
OUTLOOK FOR SOUTHERN AFRICA
Across Southern Africa, succession to new leaders or prospective leaders is expected in Angola, Zimbabwe, South Africa and Botswana.
South Africa
In South Africa President Zuma will face his greatest challenge yet at the ANC conference in December and Control Risks anticipates a divisive and tightly-contested succession battle between Cyril Ramaphosa and Nkosazana Dlamini-Zuma to replace him as head of the party. While Control Risks expects a likely Ramaphosa victory, Zuma and other party officials in favour of Dlamini-Zuma will look increasingly to employ rhetoric critical of ‘white monopoly capital’ in a bid to mobilise a broad support base. Calls for ‘radical economic transformation’ are not likely to result in significant legislative or regulatory changes, but the ANC is nonetheless likely to continue to focus on transforming the private sector beyond the 2017 conference as it attempts to mitigate electoral losses at the 2019 general elections. Efforts to uproot deeply entrenched patronage networks will proceed slowly regardless of the outcome of the 2017 conference or concerns amongst senior party officials that the ANC will lose support in 2019.
Angola
The August 2017 elections will mark the end of President José Eduardo dos Santos’ 39-year rule as he hands power to current defence minister João Lourenço. The succession process will be orderly and another election victory by the ruling Popular Movement for the Liberation of Angola (MPLA) is in little doubt. Nonetheless, substantial political shifts are likely as dos Santos transfers powers away from the presidency and Lourenço seeks to build support across a more fragmented landscape.
Mozambique
The administration of President Filipe Nyusi will continue to struggle to overcome severe financial constraints and reach a peaceful resolution to Renamo’s insurgency. We expect some success in this regard, as findings of widespread corruption in the issuing of more than USD 2 billion of state-guaranteed debt weakens the disruptive influence of former president Armando Guebuza (2005-15) and Renamo’s military weakness forces them to the negotiating table. Yet progress will be slower than the optimistic projections currently put forward by government officials, and the political and economic situation will remain fragile throughout 2017.
Zimbabwe
The 93-year-old President Robert Mugabe is increasingly frail and facing intensifying political pressure, with an economy reliant on the quasi-currency of ‘bond notes’ susceptible to a sudden loss of confidence and senior stakeholders in the Zimbabwe African National Union – Patriotic Front (ZANU-PF) anxious to ensure a smooth succession process. Vice President Emmerson Mnangagwa remains the clear frontrunner to assume the presidency, although until he does political infighting will continue to distract from effective governance.
Democratic Republic of Congo
The issue of succession will be felt acutely in the Democratic Republic of Congo as President Joseph Kabila makes continued efforts to cling on to power after his second term ended in December 2016. A highly contested transition, which should lead to elections in late 2017 but is likely to be further extended, will provide detrimental to the business environment and carry high risks of political violence.
The world map with countries’ political and security risk forecasts is available here
George Nicholls | Senior Partner : Control Risks in Southern Africa | https://www.controlrisks.com/ | George.Nicholls@controlrisks.com |