Sub Saharan Africa in better shape but challenges remain

Ratings agency Fitch has maintained a negative outlook for Sub Saharan Africa (SSA), although the number of sovereigns with negative outlooks has declined. It said the negative outlook for the region reflects upward risks to already high debt levels in several sovereigns and incomplete adjustment to the earlier commodity price fall. However, some progress on fiscal and external adjustment has been made and GDP growth will rise for most countries in the region. The SSA median government debt is expected to decline in 2018, according to Fitch. “In many countries, the fiscal balance will be boosted by higher oil revenues, fiscal consolidation and, in some countries, lower domestic interest rates. International Monetary Fund programmes are supporting fiscal consolidation and external adjustment efforts in a number of countries,” it said. However, upward pressures on government debt will persist in the medium term and Fitch warned that foreign exchange constraints will remain a source of instability. GDP growth is expected to strengthen in a majority of countries. Higher commodity prices, easing of drought conditions and improved access to foreign exchange will boost growth to 2.9% in 2018, from 1.9% on aggregate in 2017, according to Fitch. Elections in the region in 2018 (Cameroon, Gabon, Mozambique and Rwanda) are not expected to lead to dramatic changes, although they will still need to be monitored closely. “However, key elections in 2019 (Nigeria and South Africa) and 2020 (Ivory Coast) will start to complicate policymaking and lead to rising tensions,” warned the rating agency. “Unrest could remain a source of challenges in a number of countries. “Elections are not expected to lead to major tensions in 2018, with only Gabon and Rwanda holding parliamentary, Cameroon presidential and Mozambique presidential and parliamentary, elections. However, after-effects of elections in 2017 will continue to reverberate.” It continued: “In Kenya, we expect the tensions over presidential elections to subside following the rejection of court appeals in November, but the irregularities around the election process will exacerbate ethnic and socioeconomic divisions and may weaken the mandate of the government. “In Angola, the new president, João Lourenço, will continue to strengthen his control over the state apparatus, having removed some key figures close to the previous president from their posts.” Meanwhile, Fitch said in South Africa, the planned selection of a new ANC party chairman in December 2017 could have far-reaching but unpredictable repercussions that will continue to play out during next year as the country prepares for parliamentary elections in 2019. A choice that is viewed favourably by consumers and businesses could have a positive impact on growth. “Preparations for February 2019 presidential and parliamentary elections in Nigeria will increasingly act as a check on the government’s ongoing fiscal adjustments, as the renegotiation of political alliances will take centre stage,” Fitch noted. “In Ivory Coast, two mutinies in 2017 over bonus payments point to the risk that positioning ahead of the presidential election in 2020 could affect stability. Security challenges in central Africa remain high. In Cameroon, tensions in the anglophone regions could escalate further. Insurgencies in Nigeria will also continue to simmer and could again escalate. The Niger Delta Avengers, which had caused substantial disruptions for oil production in 2016, recently announced the termination of a ceasefire,” the ratings agency added.

Sub Saharan Africa in better shape but challenges remain

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