Missed opportunities remain major risk across Africa for 2021

The Covid-19 pandemic, emerging digital threats, climate change and the US-China relationship are among the top five risks for business in 2021. However, in its annual forecast, Control Risks said that, underpinning these risks, the danger of missing the rebound in a year of multi-speed recovery is a top risk for business in the coming year. Control Risks CEO Nick Allan stressed: “There’s no doubt that businesses will continue to face considerable disruption from the Covid-19 pandemic, but we believe that the opportunities are real and exciting for many companies in 2021.” Tom Griffin, partner – Africa and Middle East, Control Risks, added: “Governance, policy consistency and rule of law are critical for investors in Africa and deep-rooted challenges remain across the continent in this realm, however we do see positive change across the region. “Recovery will be an opportunity for governments to address structural constraints and promote new approaches and technologies – the region remains front and centre for many of our clients,” he added. All top five global risks are present in Africa but play out in unique ways, according to the report. However, Control Risks found that in some areas the continent presents a positive break from the more negative global trends, such as in the regional cooperation shown by the continent in its response to Covid-19 and the planned launch of the African Continental Free Trade Area (AfCFTA). Overall, however, 2021 will be a tough year for a continent that will struggle to recover from Covid-19 as fast as much of the rest of the world. Despite many significant opportunities for investors, the markets they are investing in will be ones characterised by significant operational and political uncertainty. The investors that will achieve success in 2021 are those that understand that Africa’s post-pandemic landscape, which will be tangibly changed from what came before, presenting different challenges and new opportunities. Overall, the top risks are: 1. A world with long Covid Overall, 2021 will be a year of uneven recovery as vaccine rollouts create a world of ‘haves’ and ‘have-nots’, with pockets of forever Covid at the bottom of the pecking order. Much of Africa, unfortunately, will be in the have-not category and companies will face prolonged operational uncertainty as localised restrictions are sporadically imposed in response to virus spikes. Africa’s economic recovery will also be more gradual, as governments with limited fiscal headroom cannot engage in sustained stimulus spending and must instead rely on underdeveloped private sectors to drive their recoveries. 2. US-China: stabilisation without normalisation While 2021 should see superficial stabilisation in the US-China relationship, the straining of the international rules-based system seen in the past few years will not go into full reverse. Competition rather than cooperation will remain the norm in international relations. In this regard at least Africa represents a welcome break from global trends, as 1 January will see the launch of AfCFTA and although full implementation of a continental free trade area will be slow, the fact that Africa is moving in that direction when much of the world is not should be attractive to potential investors. 3. Go green or go bust An inflection point is coming for the relationship between businesses and climate change in 2021. No organisation can now afford not to take a stance. The environment is a critical aspect in the broader ESG agenda. Although no African country bar South Africa has made a net-zero pledge to date – without special funding, governments do not view it as a priority – the continent nonetheless has huge renewable energy potential. Renewable energy projects connected to microgrids make sense in a continent of small population centres spread over huge areas, and the recent liberalisation of energy markets in many countries has opened up multiple opportunities for private-sector investors. Without government backing, however, investors may ignore these opportunities in favour of the subsidies and support on offer elsewhere. 4. Digital acceleration hits emerging threats The remarkable increase in connectivity across Africa – in mobile phone penetration, internet penetration, social media use and data traffic flows – has opened up a vast array of new opportunities. This is evidenced by the rapid growth in the African tech sector during the past few years. But this connectivity also brings risks. Cybercrime has boomed across Africa, from simple scams to sophisticated attacks on critical infrastructure. Criminal and state actors have also engaged in influence operations, spreading misinformation and inflammatory content that poses reputational risks to companies as well as political players. Companies in Africa, just like the rest of the world, will have to balance the drive for technological innovation with security, integrity and resilience challenges. 5. Missing the rebound The coming year will see strong GDP growth in multiple markets, the rollout of vaccines and a world hungry to start living again. While progress will be faltering, an uplift is coming – do not miss the rebound. If 2020 was about survival for many companies, 2021 is the time to focus on opportunity. Under the duress of Covid-19, many companies have flexed, not broken. Through innovation, rapid technology adoption and streamlining, they have emerged stronger, while weaker competitors have fallen. Those companies that turn the efficiency gains of 2020 into productivity gains, continue to accurately assess trends and show flexibility in adapting their operations, will benefit from the coming surge in demand.

Missed opportunities remain major risk across Africa for 2021

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