Thirty per cent of Africa’s economies more at risk from ‘external shocks’ to growth

According to Maplecroft’s 6th annual Global Risks and Resilience Atlas, which measures 36 risk indices in 179 countries, a deteriorating operating environment for investors in Sub-Saharan Africa is unfurling. The report suggests 15 Sub-Saharan countries are facing a significant increase in risk – accounting for almost 75% of nations facing heightened exposure in 2014. Mali (ranked 13th most at risk in 2014, from 57th in 2012) experienced the biggest upsurge, while Guinea (20th from 29th), Eritrea (22nd from 46th), Madagascar (26th from 54th), Mozambique (33rd from 45th), Senegal (37th from 44th) and Tanzania (38th from 47th) were among the other countries to see risk rise. Dr Charles Laurie, Head of Maplecroft’s Africa practice, said “While investors are eager to enter and expand in sub-Saharan Africa’s growing markets, the continent’s potential hinges on establishing confidence that governance is sufficiently robust and accountable to withstand exposure to a host of socio-political as well as resource security related risks. Tackling corruption remains critical.”hideEast Africa has overtaken Central Africa as the region most exposed to global risks, due primarily to an escalation in political violence in countries such Madagascar, Mozambique and Tanzania. Rising security risks in East Africa present a significant challenge for investors, particularly those in the extractive sector lured by the region’s abundance of natural resources. Instability in South Sudan (2nd in the Global Risks Exposure Index), Somalia (3rd) and Sudan (6th) also contributes to cross-border threats in the region, as seen in the September 2013 al Shabaab attack on the Westgate shopping mall in Nairobi, Kenya (16th). Exposure to global risks is also on the rise in West Africa, with the average score for the region downgraded to ‘high risk’ for the first time. As in Central and East Africa, the region’s lack of resilience, in particular resulting from poor governance, is undermining the ability to bounce back in the event of an external shock. West Africa’s biggest economy, Nigeria, which is forecast to be one of the next growth hotspots, has seen its position in the Index deteriorate from 22nd to 14th in the last year, primarily as a result of an increase in governance risks. Meanwhile, in two recently launched country reports, Maplecroft identifies the political environment as the number one risk. Firstly, in Somalia, following its inauguration in 2012, the government has had limited success in exerting its authority or facilitating cohesion within Somalia’s fractured political environment. The implications are that potential investors will face a hugely difficult political context. There is little in the way of effective governance structures and the different fragments of the country effectively operate as unrelated political entities. Secondly, in South Sudan, Maplecroft said growing political instability is linked to the deteriorating security outlook. The government does not control large segments of the territory and the scope for improvement appears limited in the coming months. Severe institutional shortcomings imply investors are likely to experience delays in bureaucratic processes. Corruption and political interference regularly affect the outcome of legal procedures, meaning that investors may struggle to secure an unbiased judgement in legal disputes.

Thirty per cent of Africa’s economies more at risk from ‘external shocks’ to growth

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