Political risks across Africa make doing business across borders harder

Doing business across borders is becoming harder, according to Control Risks’ Risk Map 2019, with companies unable to avoid local risks while keeping an eye on global trends. It points to Africa where it notes: “The dramatic political changes seen across Africa in the past year have similarly been driven as much by local pressures as global trends. “Robert Mugabe survived almost two decades of sanctions, but his 37-year rule was brought to an end by personal ambitions and succession battles within the ruling Zimbabwe African National Union – Patriotic Front.” Meanhile, on Angola it states: “The ambitious reform agendas of Angolan President João Lourenço and Ethiopian Prime Minister Abiy Ahmed are shaped by external pressures but have been primarily motivated by domestic political circumstances. “For all the talk of rising populism in Europe and elsewhere, leaders across Africa – albeit with notable exceptions – have broadly shifted towards pragmatism in their willingness to liberalise markets and strengthen regional cooperation.” Control Risks suggests: “Business can’t drop one ball to pick up another. It can’t lose track of prosaic local risks to focus on global issues. But it may not have local risks to manage if it falls foul of fundamental changes in geopolitics. Doing business across borders is getting harder and doing business within them is getting more bespoke.” It’s not clear what future lens will be applied to this era, it adds. “Regardless, the lenses that companies use to understand their world will need to be multiple and more complex than ever before. “As such, companies need to rigorously prioritise what really matters to them – commercial, political, global, local – and be constantly mindful of where those strands intersect. The onus on corporations is unprecedented.” It warns: “A global footprint naturally increases exposure to the vagaries of geopolitics, from trade wars to real conflict. But recently, the degree of political risk faced by companies has intensified. “A generation of business leaders conditioned by globalisation finds itself on the sharp edge of fierce national competition for jobs, technology and tax revenue. These business leaders are having to quickly recalibrate.” It also warns: “Locating a new factory or attending an international summit is now a political statement, as much as a commercial and operational consideration. In a fractured world order, the business of business is no longer just business.” In its annual review of world risks, Control Risks notes: “Some international businesses are responding by developing strategies and structures to survive in markets mired in trade disputes or other major geopolitical change. “To take one common example, ‘how to future-proof my supply chain in China’ used to be an essay question answered by security and risk managers: who is going to defraud it and where might physical disaster strike? Now it’s the subject of board-level ‘corporate security councils’ interrogating how to ‘mitigate the impact of US commercial nativism’ and ‘navigate the newfound assertiveness of Xi Jinping’s industrial policy’. “Put simply, companies are waking up to the need for an approach to market strategy that doesn’t simply bolt on political risk to more numeric approaches to assessing opportunities,” states Control Risks, adding: “Counterintuitively, a key challenge for business in 2019 will be to avoid being overly distracted by geopolitical drama. “Foreign companies ensnared by corruption scandals, capricious regulatory implementation or attacks on local partners often find they were not focusing on local, material threats to their business.” Nigeria In Nigeria, two political stalwarts – President Muhammadu Buhari and former Vice-President Atiku Abubakar – are squaring up for a tightly fought election in February 2019. Gillian Parker, an analyst covering west and central Africa for Control Risks, says: “Electoral dynamics favour Mr Buhari, who has the advantage of incumbency and appeal in the north, which has the most registered voters. Mr Abubakar, running on a People’s Democratic Party (PDP) ticket, is expected to exploit a growing elite consensus against Mr Buhari and mobilise apathetic voters to support him.” She believes Buhari is likely to maintain the status quo if he wins a second term. “He is unlikely to budge on the economy, or currency controls – to the chagrin of many. His punitive anti-graft campaign could drag corporates under the spotlight – particularly those with exposure to his political foes,” she warns. If appointed as President, Mr Abubakar promises to deregulate the forex market and encourage privatisation with pledges to overhaul the oil industry – an area where the country’s previous Presidents have failed dismally. “Regardless of who wins the next year, Nigeria’s endemic problems with graft, infrastructure bottlenecks, insecurity and exposure to fluctuations in commodity prices will remain challenging for companies operating in Nigeria,” Ms Parker concludes. “The country emerged last year from its deepest recession in over two decades, but Nigerians have seen little recovery in their daily lives.” Ethiopia Ethiopia has previously been known for its tightly controlled political and economic system, but new Prime Minister Abiy Ahmed, who was appointed in April 2018, has brought rapid change to the country. Patricia Rodrigues, an analyst covering east Africa at Control Risks, says: “After selecting an inclusive and technocratic cabinet, reshuffling the leadership of the security forces and signing peace agreements with former insurgent groups over the last year, 2019 will illustrate the strength and reach of Mr Abiy’s reforms. “If local elections are held as scheduled in the coming year, those in Ethiopia's two chartered cities – the capital of Addis Ababa and eastern commercial centre of Dire Dawa – will provide a litmus test of Mr Abiy’s popularity.” She also suggests: “As Mr Abiy has also promised more openly contested polls, the elections should also reflect the strength of independent opposition parties. The ability of Mr Abiy to balance the competing interests of Ethiopia’s main ethnic groups and political elites while managing the high expectations of the large young population, will be critical to addressing internal security threats and to attracting foreign investment in the year ahead.” The good news, she concludes, is that: “In addition, Mr Abiy’s diplomatic efforts with Djibouti and Eritrea – if proven successful – have the potential to unlock economic opportunities and reduce security threats in the wider Horn of Africa region.” Marine Security on the seas has improved in recent years but 2019 is not a year for complacency, as established pirate groups seize on vessel vulnerabilities and new threats emerge, warns Cormac McGarry, Control Risks’ lead maritime analyst, who explains: “The Gulf of Guinea will continue to be the world’s foremost piracy hotspot, with no let-up in the scourge of robbery and offshore kidnaps that trouble the region. Hijacking attacks in the Gulf of Guinea will continue to be a threat to mariners, vessels and cargo in 2019.” He believes: “Off the Horn of Africa and Arabian Peninsula, Somali piracy will largely be kept under control. However, any easing of commercial shipping safeguards will motivate attackers.”

Political risks across Africa make doing business across borders harder

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