The key parties in Cote d’Ivoire are realigning ahead of the presidential vote in 2020, injecting some much-needed competition into the country’s political sphere that has been dominated for the past 8 years by President Ouattara. However, if the incumbent decides to run for a third term, he is likely to face a backlash of ethnic and identity politics from united opposition parties that would increase the risk of violence and commercial disruption, although a repeat of the 2010-11 civil war is unlikely.
A lack of demand for intra-regional formal trade in West Africa may prove the most serious challenge for the single currency’s eventual launch and success. Unlike the Eurozone in the 1990s, West African economies are geared towards exporting to western or Asian markets, rather than its neighbours. Few West African countries are likely to meet all currency convergence criteria over the next year, while most CFA countries will be reluctant to replace their stable monetary regime with the messy managed float of the Nigerian naira.
Over the past year, the rapid encroachment of Sahel-based Islamist militant groups on the borders of West African coastal states has prompted widespread concern that previously unaffected locales are now under threat. Based on the geographic dispersal of regional militant actors and their current capabilities and intent, EXX Africa assesses the possible scenarios and likely locations for a terrorist attack in these coastal hubs.
Since 2015, a rapid expansion of Islamist militant activity in West Africa and the Sahel has corresponded with an unprecedented level of violence across the region. In particular, high-impact terrorist attacks in major urban centres in Mali, Burkina Faso, and Côte d’Ivoire have become more frequent, pointing to both an increased capability and reach on the part of regional militant organisations. As the violence encroaches on the borders of West African coastal states, concerns abound that the terrorist threat may spill-over into these previously unaffected locales.
The Primary Threat Actors
Who they are and where they operate
With the exception of Nigeria, no militant groups have demonstrated a significant operational presence in West African coastal states. However, since 2015, the number and geographic distribution of Islamist militant groups operating in West Africa and the Sahel region have increased at a rapid pace, extending the risk to these regions.
The primary hub of militant activity in the Sahel stretches from north-eastern Mali and western Niger, to south-eastern Burkina Faso, encompassing the border areas between the three states. Groups operating here include the Islamic State in the Greater Sahara (ISGS), and an Islamist militant coalition, Jama’at Nusrat al Islam wal Muslimeen (JNIM). JNIM includes several regional groups, including Ansar Dine, the Sahara-based branch of Al Qaeda in the Islamic Maghreb (AQIM), and Al Mourabitoun (See MALI: UNRELENTING SOUTHWARD EXPANSION OF ISLAMIST MILITANCY IN THE SAHEL).
Despite numerous international counter-terrorism efforts, militants in the Sahel have intensified their activities over the past five years. The number of militancy-related violent incidents across the region reached a peak in 2018, when 465 incidents were recorded, compared to 90 in 2016. In addition, French and UN military operations in Mali have pushed many militants beyond their established areas of operation in the north-east of the country, into previously unaffected areas. For instance, 2018 saw a surge of militant attacks connected to both JNIM and ISGS in south-eastern Burkina Faso, in close proximity to the country’s borders with Ghana, Benin, and Togo (See BURKINA FASO: COUNTERING THE SPREAD OF ISLAMIST MILITANCY).
A second regional hub of militant activity is in north-eastern Nigeria, and the border areas between Niger, Chad, Nigeria, and Cameroon. The primary groups operating in this region are Boko Haram and its offshoot, the Islamic State in West Africa Province (ISWAP). Boko Haram and ISWAP’s activities remain focused on north-eastern Nigeria and across its border, where they are conducting an insurgency against the Nigerian military. However, Boko Haram has previously threatened to enter into northern Benin through its porous north-eastern border with Nigeria although thus far there have been no incidents in Benin associated with the group (See SPECIAL REPORT: THE RETURN OF BOKO HARAM IN AND BEYOND NIGERIA?).
Militant groups operating in West Africa and the Sahel have varying degrees of capability. The majority of attacks orchestrated by these groups occur in outlying areas where they either conduct direct assaults on villages and pastoral camps during which they kill high numbers of civilians and loot as many goods as possible, or conduct raids or improvised explosive device (IED) attacks against army positions and patrols.
However, several groups have also demonstrated the capability to conduct complex coordinated assaults in regional urban hubs. For example, on 2 March 2018 JNIM conducted an attack in Ougoudougou, the capital of Burkina Faso, simultaneously targeting the Burkinabe national army headquarters, the French Embassy, and the French Institute, killing 30 people. Such attacks have included the use of suicide vests and vehicle-borne improvised explosive devices (VBIEDs) (See BURKINA FASO: SIDELINED SECURITY SERVICES SEEK COLLABORATION WITH ARMED MILITANTS).
This increase in the geographic spread, as well as the volume and intensity of violence in the past two years, is in large part a product of greater cooperation and coordination between regional militant groups which has facilitated the formation of militant coalitions. In addition, the capability of militant groups to conduct operations across national borders has been bolstered through close connections to regional criminal activity, including the smuggling of arms and ammunition.
Attacks in West African urban centres remain driven in large part by resistance to foreign military intervention in Mali, especially ongoing French counter-terrorism operations. Islamist groups in the Sahel have also proclaimed their intent to carry out attacks on targets linked to those countries participating in the UN Multidimensional Integrated Stabilisation Mission in Mali (MINUSMA). This includes most states in the West Africa and the Sahel region, as well as a high number of Western countries. Correspondingly, the vast majority of militant attacks across the region have targeted international and local forces engaged in peacekeeping and counter-insurgency operations.
However, attacks in major urban centres have overwhelmingly targeted sites associated with the presence of high numbers of Western civilians, such as popular restaurants and hotels, as well as embassies. Areas where French nationals routinely congregate, including French government and military facilities, are especially likely to be targeted in such attacks. However, all Westerners are ostensibly under threat, as indicated by previous attacks on sites where large numbers of foreign nationals from a variety of Western states are present. While no attacks have yet taken place in West Africa against large malls or shopping complexes, these are also likely to constitute primary targets due to the typically high number of Western expats frequenting such locations.
Anatomy of a militant attack
Taking into account the historical modus operandi of militant groups in West Africa, as well as their current capabilities, the most likely form of attack in any of the large urban centres in West African coastal states is an assault by multiple gunmen on a prominent restaurant, hotel, foreign embassy, beach resort, or shopping complex.
Most previous attacks have involved groups of between two and ten attackers armed with assault rifles and wearing suicide vests. In some cases, assailants wore the official uniforms of state security forces, both delaying the reaction of victims in the target area, as well as complicating efforts by first responders to positively identify threats. As demonstrated in Burkina Faso in March 2018, such an attack may also consist of multiple groups of gunmen targeting disparate locations simultaneously.
In a number of major attacks in urban centres in Mali and Burkina Faso, militants have also employed IEDs/VBIEDs as precursors to an assault by multiple gunmen. In some instances, IEDs/VBIEDs employed against secondary targets have also been used to draw the attention of security forces and emergency services away from the primary site of an assault, increasing the overall lethality of an attack. However, with limited presence in the West African coastal states, militants are less likely to be able to manufacture or transport VBIEDs as easily as in the Sahel.
Top Ten West African Cities at Risk
|2||San Pedro||Cote d’Ivoire|
(1) Abidjan and (2) San Pedro (Côte d’Ivoire)
One previous terrorist attack has been recorded in Cote d’Ivoire: On 13 March 2016, three gunmen carried out an attack on a beach hotel in Grande-Bassam (30km east of Abidjan), killing 19 people (See AL-QAEDA ATTACKS COTE D’IVOIRE). AQIM and Al Mourabitoun jointly claimed responsibility for the attack. Côte d’Ivoire has since increased internal security measures in urban centres, including a greater police presence around vulnerable sites such as prominent hotels. Nonetheless, due to Côte d’Ivoire’s role as a close security partner of France and host to a French military base, militant groups retain a high intent to target the country. Indicative of this, on 8 November 2018, Iyad Ag Ghali, the leader of Ansar Dine, called for attacks against Côte d’Ivoire specifically. One month later, on 6 December 2018, security forces in Mali reportedly apprehended a militant cell which was planning to conduct an attack in Côte d’Ivoire, targeting New Year’s celebrations (See COTE D’IVOIRE: NEW YEAR’S EVE TERROR PLOT INDICATES RISING THREAT OF JIHADISM).
(3) Cotonou and (4) Porto Novo (Benin)
Benin shares over 2,000km with four countries, three of which (Burkina Faso, Niger, and Nigeria) host the above militant groups. In particular, reports of cross-border militant activity in southern Burkina Faso have increased over the past two years, with local residents in northern Benin alleging that Islamist fighters have visited their communities periodically. In early 2019, several incidents indicated a possible escalation of militant activity in the border region. Notably, in May 2019, two French tourists were kidnapped in the Pendjari National Park in northern Benin. While no group claimed responsibility, the victims were rescued days later in a French military operation in northern Burkina Faso, suggesting that militants were involved (See BENIN: POLITICAL UPHEAVAL AND ISLAMIST MILITANCY WILL NOT DERAIL ECONOMIC SUCCESS). In addition, there is some evidence that terrorist cells are present in Benin; in May 2018, 42 people were arrested during counter-terrorism operations. Militant intent to target the coastal country is likely to stem from Benin’s contribution to the UN MINUSMA operation in Mali/Burkina Faso. Benin was also one of the countries specifically mentioned in Ag Ghali’s video last year.
(5) Lomé (Togo)
As with Benin, over the past year Togo has seen an increasing amount of militant activity on the country’s northern border with Burkina Faso. In April 2018, authorities reported that more than 20 militants had entered the country from Burkina Faso, bringing with them notable sums of cash. Thereafter, in response to the growing threat on their borders, Togo, Benin, Burkina Faso, and Ghana conducted a joint security operation in May 2018 in which over 200 people were arrested, many of which on terrorism charges. Additionally, in February 2019, five people, including a Spanish priest, were reportedly killed by Islamist militants during two separate attacks on the border between Togo and Burkina Faso. Togo is also a major contributor to the UN MINUSMA operation in Mali/Burkina Faso, driving intent to target the country. The security response to the threat by the government has focused on increasing military operations in the porous border area, which is likely to have a limited impact on mitigating the risk of an attack in Lomé.
(6) Dakar and (7) St. Louis (Senegal)
Senegal remains one of the foremost contributors to the UN MINUSMA operation in Mali/Burkina Faso, and as such constitutes a potential target for regional militant organisations. Senegal is also a military partner to France and hosts a French military presence at Léopold Sédar Senghor International Airport in Dakar. Direct intent to target the state is also evident, as Senegal was one of the countries mentioned in Ag Ghali’s video last year. Militant cells have been previously dismantled in both St. Louis and Dakar, both of which host high numbers of Western expatriates. Most recently, in July 2018 a Senegalese court sentenced 14 people to prison on charges of belonging to AQIM and Boko Haram. However, since 2016 Senegal has significantly bolstered security measures in major urban centres, including the provision of additional protection for international airports, prominent hotels, and popular tourist sites. While these measures have not been applied consistently, it is likely that they will constrain the ability of militants to carry out attacks in either city (See TERROR THREAT IN DAKAR, SENEGAL).
(8) Accra and (9) Sekondi-Takoradi (Ghana)
As with Benin and Togo, Ghana’s northern border is under threat from militants operating in southern Burkina Faso. Over the past year, Ghanaian security forces have implemented measures to address possible threats, including joint border security operations with neighbouring countries and renewed counter-terrorism training for the Ghanaian police. However, in May 2018, 13 people were arrested in Ghana on terrorism charges, suggesting that militant networks are already operating within the country. Both Accra and Sekondi-Takoradi host a high number of Western tourists and residents, providing a range of target opportunities for militant groups. Intent to target Ghana derives primarily from the country’s ongoing contribution to the UN MINUSMA operation in Mali/Burkina Faso. The country was also specifically named in Ag Ghali’s video last year (See GHANA: TERRORISM THREAT RESURFACES AS ISLAMIST MILITANCY GAINS A FOOTHOLD). The port of Tema has also faced numerous attack scares over the past year, although the viability of such reports has often been questionable and more likely derived from organised crime (See GHANA: SUSPECTED TERRORISM SCARE TO DRIVE DISRUPTION IN TEMA PORT AREA).
(10) Lagos (Nigeria)
While militant activity has focused on the north-east of the country, Boko Haram’s presence extends to Nigeria’s commercial capital. Since 2015, Nigerian security forces have reported multiple police raids targeting Boko Haram militants in the city. Most recently, in December 2018 a prominent Boko Haram leader reportedly responsible for planning several major bombings in the capital, Abuja, was arrested in Lagos. Nonetheless, only one militant attack has taken place in Lagos in the past five years, and it remains likely that Boko Haram will continue to focus the bulk of its efforts further inland and across the border into Niger and Chad. Attacks targeting Western foreign nationals are more likely to take place in Abuja, where multiple IED/VBIED attacks have taken place since 2011 (See NIGERIA: ISLAMIST MILITANTS PREPARE NEW OFFENSIVE TO CAPTURE TERRITORY IN NORTHEAST).
The governments of Ghana and Cote d’Ivoire are moving closer to cocoa market consolidation and are due to introduce a relatively modest minimum floor price for producers to alleviate widespread poverty among farmers. The countries have threatened to suspend forward sales until the plan is put in place. However, there remain challenges to implementation including lack of liquidity. The strategy could also backfire by creating a supply glut and causing a structural weakness in the cocoa market, motivating divestment from West Africa to other cocoa-producing regions.
Transport logistics are a vital and promising sector for business in Africa. However, traversing land, sea, and air routes across the continent comes with a plethora of political and security risks. EXX Africa explores the key concerns in this regard, their manifestation, impact, and outlook.
Doing business in Africa is beset with a number of political and security risks. Recent research by Aon reveals that 70 percent of countries in sub Saharan African are currently at risk from strikes, riots, and other types of civil unrest while 25 percent are at risk from sabotage and terrorism. Although government assets are most frequently targeted during such events, these risks ultimately affect the viability and profitability of private entities and investments as well.
The latest Emerging Markets Logistics Index, which ranks 50 emerging economies across the world, places these concerns in the transport logistics sector. Agility Logistics produces this index. Rankings are pulled from data from institutions such as the IMF, the OECD, the World Bank, the UN, and the WEF, among others, and is supported by a survey of trade and logistics industry professionals. Findings from the 2018 Index reveal that many of the top supply chain risks in sub Saharan Africa relate to political and economic concerns, with industry professionals citing corruption (23 percent), government instability (18.3 percent), terrorism (9 percent), and piracy (4.1 percent) as major risks. In North Africa, terrorism (43.8 percent) and government instability (19.9 percent) together represent almost two thirds of the primary concerns.
A similar long-term study by Willis Towers Watson echoes these findings. Its 2016 Transportation Risk Index, compiled from data and insights derived from 350 interviews with executives in the sector, noted that the number one long-term (up to ten years) megatrend for logistics across the continent concerned geopolitical instability and regulatory uncertainty.
Such political and security risks tend to affect transport logistics across the continent in three ways: border closures or delays, the targeting of state assets, or the targeting of private assets. We explore each of these manifestations, identifying their major trends, impact and outlook below.
Border closures and delays
Government and geopolitical instability frequently result in the planned or unexpected closure of land, sea and air routes, affecting the movement of goods and services. Such closures most often arise as a result of a change in government – whether by democratic or undemocratic means – or as a result of bilateral tensions between neighbours.
Election periods pose one of the primary threats in this regard. Even votes deemed free and fair, and organised by democratically elected governments can cause disruption. During the General Elections in Nigeria in February 2019, for example, the government announced the closure of all borders and implemented various restrictions on vehicular movements for the voting weekend. A similar elections-related border closure took place in December 2018 when the Democratic Republic of Congo (DRC) closed its borders with its nine neighbours as it held its long-awaited polls.
Unexpected changes of power, such as via an insurrection, coup, revolution or rebellion, further results in risks to the logistics sector and induces high levels of uncertainty. During the successful removal of President Omar Al-Bashir in Sudan in April 2011, following weeks of anti-government protests, the transitional military council closed the country’s airspace for 24 hours as well as all border crossings until further notice.
Unsuccessful attempts at regime change can also result in panic, as witnessed in January 2019 when Gabon suddenly closed its border with Cameroon following an attempted coup against President Ali Bongo. All cross-border trade ground to a halt forcing local businesses to divert their goods to Equatorial Guinea.
Poor bilateral relations can further limit the flow of goods and services. While there are some known long-standing tensions between neighbours that have resulted in border closures, such as between Morocco and Algeria (ongoing for 25 years) and Ethiopia and Eritrea (borders have closed again despite a peace deal in July 2018), emergent socio-political developments can cause abrupt stoppages to cross-border commerce as well. In February 2019, Rwanda unilaterally decided to close its busiest border with Uganda over mutual allegations of threats to national security. The decision not only affected bilateral trade but impacted trade to Burundi, the DRC and Zambia as well. One month later, borders were again closed in Southern Africa, this time between South Africa and Mozambique following xenophobic attacks in Kwa-Zulu Natal province. During this incident, a crowd of around 200-300 Mozambicans barricaded the N4 and began targeting trucks with South African license plates.
Targeting of state assets
Beyond broader political threats and the closure of borders, the logistics sector is often impacted by security-related incidents in which non-state actors target key state infrastructure assets. Such incidents may emerge during acts of militancy, labour unrest or sabotage.
The strategic importance of a country’s infrastructure – particularly its ports – often renders these assets prime targets for militant attacks and activity. This has been demonstrated repeatedly in conflict zones over the past 12 months, with attacks reported against sea and air ports in Somaliland (Bosaso Port), Somalia (Mogadishu International Airport), Libya (Ras Lanuf and Es Sider Ports, and Mitiga International Airport), Niger (Diffa Airport), and Mali (Sevare Airport). Militants may even attempt to seize such assets for political leverage. In March 2019 in the Central African Republic, a local rebel group stationed at the border post with Cameroon blocked cargo to impede commercial traffic in an attempt to force the government to include them in the newly formed government.
The economic importance of logistical infrastructure further incentivises established worker unions to target such assets during labour disputes and negotiations. In this instance however, disruptive events are not limited to conflict zones but can be found across all countries, including the major economies. In a 2019 survey on supply chain risk management in South Africa, all 20 participants identified socio economic factors, such as labour unrest, as a key source of vulnerability. South Africa has also been impacted by frequent incidents of sabotage within the logistics sector, with arson and derailment attacks having recently been carried out against both its passenger and cargo rail services.
Targeting of private entities
Political and security risks may also affect private commercial entities and their assets directly as well. One of the primary security threats in this regard is posed by piracy. While this threat is location and sector specific, its impact is significant – particularly considering that 90 percent of African imports and exports are moved by sea. According to the 2018 Oceans Beyond Piracy report, in East Africa alone, the annual cost of maritime piracy was estimated at USD 1.4 billion in 2017 (down from USD 7 billion in 2010) while in West Africa it was estimated at USD 818 million (up from USD 719.6 million in 2015).
Most concerning, according to the latest statistics released by the International Maritime Bureau, the threat from piracy is increasing in West Africa. Since 2014, there have been approximately 250 actual and attempted attacks in the Gulf of Guinea, with a 70 percent increase in incidents being reported between 2017 and 2018 alone. This surge is expected to result in associated rises in the cost of maritime business, particularly with regard to insurance. In 2017, the total costs of additional premiums incurred by ships transiting the Gulf was calculated at USD 18.5 million. Moreover, it was estimated that 35 percent of all ships now take out Kidnap & Ransom insurance, totalling USD 20.7 million.
Companies operating in the transport logistics sector are also frequently targeted by corrupt individuals. The sector remains particularly vulnerable to corruption given its close engagement with customs officials who are often underpaid and look to increase their wages through opportunistic facilitation payments. Extensive red tape and delays further amplifies this risk: according to the African Development Bank, the average customs transaction across the continent could involve 30-40 different parties. In addition to increasing commercial operating costs and affecting intraregional and international trade, such corruption at ports of entry and exit frequently facilities a range of illicit activities as well, such as the smuggling of people and goods, and tax evasion.
Despite these challenges, there remain sound opportunities for transport logistics in Africa. Egypt, Morocco, Algeria, Tunisia, Libya, South Africa, Nigeria, Ethiopia, Ghana, Tanzania, Uganda, Kenya, Mozambique, and Angola all featured within the Emerging Markets Top 50 Logistics Index last year.
Looking more closely at the data, Egypt and Ethiopia were identified as having made significant strides in the logistics sector. The improvement in business conditions in Egypt, including the reduction in business costs associated with crime, violence and terrorism, has been identified as one of the primary reasons for it jumping six places in the index last year – the most of any country. Similarly, Ethiopia’s goal to become a low-cost manufacturing and textiles hub along with the opening of Africa’s largest cargo terminal in Addis Ababa has attracted much attention. However, ongoing security concerns, especially the threats posed from ethnic conflicts and terrorism along border areas with Somalia and Kenya, were identified as setbacks.
In another promising development, South Africa, Nigeria, Egypt, and Kenya were identified within the pool of countries that have the most potential to grow as logistics markets within the next five years. However, sub Saharan Africa’s two largest economies – South Africa and Nigeria – each fell down the index, with Nigeria falling seven spots. Both countries were nevertheless identified as turning a corner, particularly with regard to corruption and political instability and uncertainty in 2019.
As demonstrated above, supply chain risks vary wildly from country to country across Africa. From isolated events that cause single points of impact (such as a militant attack), to ongoing events that generate a localised yet sustained impact (such as strikes), to all-encompassing events (such as a coup), companies in the transport logistics sector are advised to stay abreast of political and security dynamics to navigate and forecast their threat environment. In addition, transport logistics should consider using political risk insurance to insulate their operations against disruption.
SEE COUNTRY OUTLOOK: ALL COUNTRIES
The Gulf of Guinea has become the world’s largest piracy hotspot since the decline of Somali piracy in the early 2010s, with incidents increasing markedly in the last two years, continuing into early 2019. With the media reporting of new attacks in recent weeks, including kidnappings for ransom, we examine the piracy threat and its trends in the Gulf of Guinea.
Reports in the last few weeks have highlighted the persistent threat of piracy, armed robbery at sea and kidnap-for-ransom in the Gulf of Guinea. Within just the first quarter of 2019, 22 incidents were recorded across the Gulf while the region accounted for all worldwide crew kidnappings with 21 crewmembers kidnapped in five separate incidents. Although the prevalence of piracy may be higher – it is believed that about half of all attacks go unreported – incidents this year have already been recorded in Nigeria, Benin, Cameroon, Ghana, Ivory Coast, Liberia and Togo.
The threat of piracy has been steadily increasing in this region over the past half-decade. Since 2014, there have been approximately 250 actual and attempted attacks in the Gulf of Guinea, according to the International Maritime Bureau’s Piracy Reporting Centre. However, between 2017 and 2018 alone, the number of attacks increased by more than 70 percent. Nigeria has been and remains the epicentre of this threat. In 2018, 48 incidents were reported in Nigerian waters and between October and December alone, 41 kidnappings were recorded off its coast. Thus far this year, 14 incidents have occurred in the country’s waters – making up over 60 percent of the total reported incidents in the region to date. While this is a slight improvement year-on-year compared to official data collected in 2018, the waters within the Gulf of Guinea, and specifically those off Nigeria, remain some of the most dangerous for vessels and crew. We explore the evolving nature of this threat and the outlook for the year ahead.
A persistent and evolving threat
The below map shows piracy and armed robbery incidents that have been reported to the International Maritime Bureau in 2019 to date. The markers show attempted attacks, boardings, incidents in which vessels were fired upon, hijackings, and suspicious vessels. If exact coordinates are not provided, estimated positions are shown based on information provided.
Emerging alongside the rise of commercial oil exploitation in the region, piracy in the Gulf of Guinea has posed a persistent threat since the 1970’s. As global maritime trade expanded from this period onwards, ports became busier and vessels were forced to wait to berth, rendering them vulnerable to opportunist attackers. Small gangs in hollowed-out tree trunks masquerading as fishing vessels carried out these first attacks. Over time, however, these makeshift canoes were fitted with outboard motors to extend their speed and range, before gradually becoming more sophisticated to include the use of advanced technologies and weapons, including speedboats, radio frequency jammers, satellite navigation and a combination of small arms and light weapons.
By the 1990s, attacks shifted from Lagos Anchorage towards the Niger Delta where incidents became more politicised as a result of contestation over the exploitation of oil and the distribution of its rents among the local population. Crimes, such as oil bunkering and kidnapping for ransom, were attributed to groups such as the Movement for the Survival of the Ogoni People (MOSOP) and the Movement for the Emancipation of the Niger Delta (MEND), who would use criminal activities to raise revenues and further political ends by bringing attention to their cause. While an amnesty programme launched in 2009 contributed to an initial decline in incidents, an increase in reprisals were reported from 2016 onwards. Today, it is evident that political insurgents have been co-opted by highly organised, sophisticated criminal groups, with clear involvement by senior politicians and members of the security force. These groups also operate outside of Nigeria, in the waters of neighbouring countries, and the threat of piracy now extends from Senegal all the way along the coast to Angola.
From steel pipes to RPGs
As small maritime-focused gangs (such as the Seadogs, the Corsairs and the Vikings), organised criminal groups and political insurgents (such as the Niger Delta Avengers, Red Scorpions, and the Niger Delta Greenland) have melded, it has been difficult to pinpoint the number of groups operating in the region and their respective sizes. In 2012, it was estimated that there were around 1,250 ‘trained’ pirates, but this figure is in itself questionable given that groups employ young men and local fisherman via ‘unions’ on a job-by-job basis depending on the skills needed. There has been little verifiable evidence subsequently to demonstrate the exact number of pirates operating across the vast number of criminal gangs and militant groups, which are generally accepted to be amorphous.
Piracy in this part of the world is dynamic and comprises theft – varying from petty to sophisticated, where crimes are planned in advance and executed with greater skill -, oil bunkering, petro-piracy – often by means of ship-to-ship transfers or attacks on offshore platforms -, hijackings, and kidnap for ransom. Attacks also target an increasingly wide variety of ships, including: bulk carriers, container vessels, general cargo vessels, tankers, oil industry support vessels, and fishing vessels.
In the majority of cases, piracy takes the form of petty theft in port or from a vessel at anchor by perpetrators armed with knives or improvised weapons, such as pieces of steel piping. However, in more sophisticated incidents, attackers have boarded vessels well outside territorial waters, up to 100nm offshore, and are armed with assault rifles, machine-guns and rocket-propelled grenades (RPGs), demonstrating the intent to use lethal violence as a tactic when carrying out an attack.
Attacks off Nigeria have become increasingly violent, with pirates making use of multiple attack boats and engaging in shootouts with naval escorts. Kidnappings have also steadily increased over the past two years in which crewmembers are abducted form ships well offshore before being brought back into Nigeria where they are held for ransom. On 29 October 2018, for example, Nigerian pirates in a speedboat hijacked a tanker 100nm off Point Noire, Republic of Congo, kidnapping eight of the 18 crewmembers.
Modus operandi differs by incident. In more opportunistic attacks, small gangs will target vessels identified to have a poor security profile, attacking under the cover of night to avoid detection. With armed robbery at sea, attackers often pose as fishermen to blend in with the many small craft, before identifying a target and launching a stealth attempt at night, where use of force is threatened if perpetrators encounter crew. In kidnappings for ransom, ‘high-value’ targets are identified beforehand. In the most sophisticated attacks, motherships may be used and intelligence gained from corrupt officials to support a hijacking and ship-to-ship transfers.
The involvement of government officials from various departments has not only provided perpetrators with valuable intelligence but, through bribes, has ensured that naval forces turn a blind eye at crucial moments. Moreover, rumours of high-level politicians directly receiving oil rents and oil companies assisting local groups in bunkering oil as a ‘cost of business’, demonstrate how licit and illicit economies in Nigeria have blended.
Shipping companies have taken a number of ‘hardening’ measures to mitigate their vulnerability to attack. These include carrying armed guards deployed by security forces, such as in Nigeria, employing best practice management strategies for evasive measures, and awaiting berth outside high-risk waters such that vessels can move swiftly to port when required. However, private military security companies are not permitted in Nigerian waters, ruling out a method that proved most successful in combatting Somali piracy. Nigeria instead allows shipping companies to hire security escort vessels carrying naval officers. This strategy is nevertheless reported to be prohibitively expensive and largely ineffective as a deterrent.
State-based and regional efforts have drawn limited success with some countries garnering better results than others. Togo, for example, has been the most enthusiastic in the region, and has managed to decrease incidents in its waters by increasing patrolling activities and being the most likely of states in the region to respond to distress calls. Nigeria, however, has a mixed record, with security forces being plagued by corruption, and the majority of its defence budget having been deployed to fight the many conflicts onshore. Nigeria also seldom responds to distress calls, having led to a trend in the late 2000s and early 2010s in which masters simply did not report attacks to local authorities.
At a regional level, the establishment of joint reporting centres and cooperation zones have been met with a positive response. However, these efforts, while extensive and proactive on paper, have been hampered by funding and capacity constraints as well as the Anglophone/Francophone divide in the region, alongside fears of amplifying Nigerian hegemony by allowing Abuja to take a leading role. As such, however useful these strategies may be, they are often not fully implemented, forcing the region to rely on support from external actors, including the EU and the US, who regularly conduct joint exercises and counter-piracy training drills.
In the Gulf of Guinea, the nature, frequency, impact and geographical dispersion of piracy fluctuates as a result of a number of factors, including: the oil price, the exchange rate, whether fuel subsidies are in effect, the efficacy of state-based counter-piracy measures, the evasive behaviour of vessels and local politics. However, while the patterns of piracy are always shifting, the risk is never fully absent.
The threat of attacks of all kinds – ranging from petty theft to kidnap for ransom – will therefore continue in the medium to long term for a number of reasons. Poverty levels remain high, meaning that young men looking for income opportunities are numerous, policing and law enforcement remains weak, and governments are frequently distracted by other security and political issues, such as Islamist extremism onshore and local elections.
Shipping companies operating in this region should exercise caution, and continue to follow the measures detailed in Best Management Practices 4 alongside the guidelines issued by the International Chamber of Shipping and its partners. Further, vessels can minimise their risk by, where possible, planning to limit the time spent at anchor or adrift, or doing so much further offshore. Vessel hardening can also prove effective in improving the vessel’s security integrity and preventing boarding. This can include the deployment of barbed wire fencing along the vessel perimeter, the utilisation of a ‘safe room’ for crew to retreat to, and the development of standard radio and emergency procedures in the event of an attack. All necessary insurances should also be in place to mitigate loss for those with commercial interests in shipping, or whose goods are bound from or destined to the region.
The start of the rainy season augurs a healthy crop for the world’s top cocoa producer and the country’s economic trajectory is set to remain stable at least in the one-year outlook. But political tremors risk shaking up Cote d’Ivoire’s relative stability that has remained intact since the 2011 civil war.
The misreporting of economic data and indicators is becoming increasingly apparent across some African countries. EXX Africa assesses the political motivations involved in the manipulation of economic statistics and the likely repercussions for investors and nascent continental trade agreements.
On 20 February, Tanzania’s National Bureau of Statistics rebased the country’s economy in order to recalculate growth in gross domestic product (GDP) over the past few years. The rebasing practice is commonplace and many African countries have rebased their economies over the past few years. Most notably, Nigeria overtook South Africa as Africa’s largest economy after a rebasing calculation in 2014 that almost doubled its GDP to more than USD 500 billion. The rebasing of Ghana’s economy last year meant that economy expanded by 24.6 percent in 2018.
However, the timing of rebasing economies is often politically motivated. In Tanzania’s case, the GDP rebasing shows a 3.8 percent expansion of the economy in the year that President John Magufuli came to power, even though there are signs that the economy has slowed since he was elected. Magufuli will seek re-election in 2020 based on a campaign pledge to broaden Tanzania’s economic growth through state-led interventionist policies.
In Zimbabwe, the statistics agency rebased some of its economic statistics last October in an unexpected move that the government said increased the nominal size of its struggling economy by more than 40 percent in 2018, which seems highly unrealistic given the country’s ongoing economic crisis. In neighbouring Zambia, the finance minister is planning to rebase the country’s GDP in 2019, which should see a sudden spike in economic growth this year, even though the economy is mired in debt and heavily impacted by falling export values.
Misreporting of national statistics
It is obvious, that the rebasing of a country’s GDP can be manipulated in order to serve political means, particularly to boost an incumbent in an election year or to deny an economic slowdown. Moreover, there have been numerous recent instances in which governments have failed to properly disclose publicly-guaranteed loans or have manufactured economic statistics, such as inflation, public debt, and GDP numbers.
This leads to a broader argument that the misreporting of statistics is commonplace in many African countries. In 2014, the Centre for Global Development (CGD) argued in a report that the misrepresentation of national statistics does not occur merely by accident or due to a lack of analytical capacity – at least not always – but rather that systematic biases in administrative data systems stem from the incentives of data producers to overstate development progress.
The CGD report argued that there are significant inaccuracies in the data being published by national and international agencies. These inaccuracies appear to be due in part to perverse incentives created by connecting data to financial incentives without checks and balances, and to competing priorities and differential funding associated with donor support. These inaccuracies, perverse incentives, and lack of functional independence mean that public and private investment decisions based on poor data can be deeply flawed, with major implications for well-being and public expenditure efficiency.
COUNTRY CASE STUDIES
In this report, EXX Africa assesses a number of African countries where there are strong indications or past precedents of manipulation of economic and financial statistics. Our case studies vary from suspected manipulation of economic growth and inflation numbers to suit political ends, to a lack of disclosure of publicly guaranteed loans. These case studies do not provide a definitive list of countries that have misreported on indicators, but do illustrate a broader problem across African economies that is likely to have a major impact on foreign investors’ risk exposure and the future of hallmark African trade agreements.
TANZANIA – EXAGERATING GROWTH NUMBERS
Optimistic central bank forecasts show that Tanzania’s economy is picking up steam again. The rebasing of GDP also ‘magically’ increases the size of the country’s economy since current President Magufuli came to power. However, falling foreign direct investment, partial donor suspensions, and a tarnished investment reputation, as well as an unfolding scandal into massive public accounting discrepancies, paint a different picture.
Tanzania’s central bank projects that the country’s real GDP would grow by 7.2 percent in 2018 and 7.3 percent in 2019, supported by public investment, particularly the implementation of mega infrastructure projects. The economy has been growing at around 7 percent annually for the past decade, but slowed to 6.6 percent in 2017.
However, Tanzania has been struggling to secure financing to fund its Five-Year Development Plan. Local sources report that a lack of public spending and private sector concerns over policy uncertainty are actually curtailing growth, rather than boosting the economy. Investor confidence has collapsed, driven by the government’s disputes with investors. As a result, foreign investment has dropped by more than 30% since 2015 when President Magufuli was elected.
Moreover, subdued government revenue collection and delays in securing financing for projects have held back development spending and hurt economic growth. A sharp fall in lending to the private sector, prompted by high non-performing loans, point to a continued slowdown in growth. Additionally, the institutions of the Tanzanian state are weakening and increasingly exposing public revenue to embezzlement and corruption. Tanzania’s public finances are in poor shape and efforts to ensure effective financial oversight face mounting obstacles.
Our recent analysis and local intelligence contradicts the Tanzanian central bank’s forecast. Last year, the government imposed criminal sentences for organisations and individuals that contradicted Tanzania’s official statistics. We laid out the arguments contradicting Tanzania’s official forecasts in a recent briefing (See SPECIAL REPORT: IS TANZANIA MANIPULATING ITS ECONOMIC GROWTH FIGURES?).
ZAMBIA – LACK OF DEBT DISCLOSURE
The budget deficit and pace of debt-accumulation are more likely to be higher than previously forecast by the Zambian government. This follows a contentious revision of the 2017 fiscal deficit by the Zambian government to factor in capital expenditures that had not been properly recorded in the previous years’ financial statements. The IMF remains the foremost remedy for the ailing Zambian economy. Anchorage from the lender of last resort and the prospect of a restoration of macro-economic fundamentals should aid in narrowing the trust deficit, plugging the funding shortfall, and unlocking the desperately needed investment inflows.
The elevated debt has also placed interest payments under scrutiny, with concerns that they may tend towards 27 percent of revenue in 2019. Disconcertingly, with the local kwacha currency rapidly ceding to the USD and the outlook on the mainstay copper industry appearing highly speculative, there is the feeling that the worst is yet to come for the externally vulnerable market. Indeed, further bullishness from the US Federal Reserve Bank or tariffs on the commodity could see the Kwacha depreciate more, revenue streams dry-up, and foreign short-term payment requirements tread further into default territory as portended by recent ratings downgrades.
Beyond the arithmetic, the downgrades, and belated disclosure of the capital expenditure also call into question Zambia’s transparency amid ongoing suspicions that the country is withholding the disclosure of its true financial position. EXX Africa has taken a strong position on Zambia’s debt disclosure since early 2018, which conflicts with official government accounts.
Unofficial accounts say that total external and domestic debt stands at USD19 billion, accounting for over 90 percent of GDP. Since early 2018, Zambia has signed more than USD1 billion in new loans, indicating that total debt could now be nearing 100 percent of GDP. External debt could be as high as USD15.6 billion, while local debt seems almost incalculable given lack of clarity in lending by state-owned entities from local banks. The argument over debt calculations centres on whether undisbursed contracted loans (mostly Chinese project finance) should be counted (See ZAMBIA: AUTHORITARIANISM AND ECONOMIC NATIONALISM GAIN FURTHER GROUND).
SUDAN – DENYING AN ECONOMIC CRISIS
The Sudanese economy is showing further deterioration as anti-government protests continue. The Sudanese pound has fallen to a record low on the black market, selling for 70 Sudanese pounds for cash transactions in recent weeks, as the gap with the official rate of 47.5 pounds continued to widen. The price of the dollar for cheque transactions stood at 83 pounds. Due to the lack of liquidity in the banks, US dollar carries two prices on the black market. The purchase price through checks is usually higher than the cash price.
The sudden depreciation over the past few weeks has been triggered by cash shortages following a run on the banks, as depositors fear the protests are gaining momentum since the opposition’s stated intent to unite against the embattled government. The Sudanese central bank sharply devalued the currency in early October to 47.5 pounds from 29 pounds to the dollar, and established a new system under which a group of banks and money changers set a daily rate. However, the official rate has barely moved, while the black market rate continues to depreciate against major currencies.
The economic crisis is being denied by the government, which recently released figures claiming that inflation was actually slowing. On 10 February, the state statistics agency said that Sudan’s inflation dropped to 43.45 percent in January year-on-year, from 72.94 percent in December led by slowing prices of food, beverages, and transport. Such figures have been widely ridiculed by both Sudanese and international economists as state propaganda.
The underlying economic and financial weaknesses remain in place and indicators such as cash shortages and currency depreciation suggest rampant inflation. A more likely forecast for January inflation would be around 85 percent, suggesting that Sudanese authorities are manipulating the statistical reports.
The most recent International Monetary Fund (IMF) report indicated that Sudan’s gross international reserves remained very low in 2017 at just USD 1.1 billion, equating to 1¾ months of import cover. Local sources report that reserves have fallen to a new low over the past three months and are fast depleting, posing sever risk of non-payment and default on loans. In EXX Africa’s most recent analysis, we considered that Sudan is firmly in debt distress and poses highest risk of debt unsustainability (See SUDAN: PROSPECT OF A ‘SUDANESE SPRING’ LOOMS AS OPPOSITION UNITES).
REPUBLIC OF CONGO – PLAYING HIDE AND SEEK WITH THE IMF
A prevailing economic crisis in the Republic of Congo – manifest in the country’s debt accounting for 110 percent of its GDP – is increasing concerns regarding the country’s short-to-medium trajectory and President Sassou Nguesso’s longevity in implementing the necessary reforms to escape the malaise.
President Sassou Nguesso says his government is negotiating “on a basis of trust” with the IMF on the country’s financial problems. However, in 2017 the IMF accused Congo of having hidden part of its debt from the organisation by claiming it was 77 percent of GDP. According to the IMF’s own calculation, the ratio is 117 percent. Last year, French media claimed that the Congolese government had skirted requirements of the IMF through a financial contrivance created by French oil giant Total.
The IMF insists that the Congolese government first needs to restructure its USD 9.14 billion in debt, which at 117 percent of GDP the Fund deems unsustainable. The permitted debt threshold in the regional Communauté Économique et Monétaire de l’Afrique Centrale (CEMAC) organisation is 70 percent. Congo is seeking to restructure its debt with commodities trading houses after borrowing USD 2 billion from merchants. However, the bulk of its external debt is owed to Chinese entities.
Without regaining access to international financial institutions and markets, Congo faces an imminent cash-flow crisis. As it is, the government has had to resort to loans from China and short-term advances from its central bank. Rescheduling Congo’s debt will be extremely difficult because of the opacity and complexity of many of its deals, such as loans-for-oil with China. France and the US seem unwilling to deliver a bail-out, which increases the probability of a regional currency devaluation. The IMF seems adamant to avoid such a regional currency devaluation.
Foreign, especially French, companies also resist a devaluation as the pegged exchange rate has assured low inflation and a French guarantee of fixed-rate convertibility to the euro. When France devalued the CFA franc by 50 percent in 1994, the result was high inflation and outbreaks of popular unrest. Therefore, all CEMAC members are opposed to resorting to devaluation. However, France will be unwilling to lend money directly to distressed and unreformed economies such as Republic of Congo. This means that a currency devaluation may become the only option left to mitigate the debt crisis, unless the IMF intervenes
MOZAMBIQUE – THE ‘HIDDEN’ LOANS SAGA CONTINUES
In early January, Mozambique’s attorney general indicted 18 nationals for their involvement in fraud involving USD 2 billion in loans to state-owned companies. The indictment includes ‘charges of abuse of power, abuse of trust, swindling and money laundering.’ The country’s Parliament and attorney general’s sudden action demonstrate growing panic inside the Mozambique government and renewed pressure to deal with the three-year old scandal that prompted the IMF and foreign donors to cut off credit support in 2016, thus triggering a currency collapse and a debt crisis from which the country is still trying to recover.
Former Mozambique finance minister Manuel Chang was among those indicted. Chang, who denies wrongdoing, has been detained in neighbouring South Africa since 29 December in a case brought by US prosecutors related to the fraudulent loans. Four days after Chang’s arrest, three former Credit Suisse bankers – Andrew Pearse, Surjan Singh, and Deletina Subeva – were detained in London. A fifth accused, Jean Boustani was arrested in the US. Boustani is alleged to have negotiated a round of bribe and kickback payments by his company shipbuilder Privinvest in order to ensure Mozambique government approval for projects to develop a coastal protection system for Mozambique’s 2,470 km coastline.
One of the projects was contracted by Mozambican state-owned company ProIndicus, which solicited USD 622 million in loans from Credit Suisse and Russian state-owned bank VTB Capital. Another project, to build a fleet of tuna fishing vessels, was housed under state-owned company Ematum, which gained USD 850 million in financing from Credit Suisse and VTB Capital. A third project involving Privinvest, nominally to build a shipyard, provide additional naval vessels, and upgrade two existing facilities to service Proindicus and Ematum vessels, fell under a third state-owned company, Mozambique Asset Management (MAM), which secured loans worth USD 500 million.
All loans were secured by Mozambique government guarantees and began to default on repayments around 2017. According to the US indictment, large bribes and fraudulent payments were made to the various accused bankers and Mozambique government officials. All accused have so far denied the allegations.
However, Mozambique’s Attorney-General has said she will seek to have those charged in the US and elsewhere face justice in Mozambique. Further arrests are expected as a number of names in the US indictment have not been disclosed. EXX Africa was one of the first risk advisories in early 2016 to flag substantial undisclosed debts, which was eventually confirmed by the Mozambique government, subsequently prompting the IMF and foreign donors to cut off support, triggering a currency collapse, and a default on sovereign debt.
Mozambique’s government is currently seeking to restructure the loans and in November struck an initial agreement with the bulk of its creditors to restructure a USD 726.5 million Eurobond. The agreement includes extending maturities and sharing future revenue from offshore gas projects. The agreement confirms EXX Africa’s longstanding forecast that creditors would not seek punitive measures against Mozambique, but would rather restructure debts while leveraging gas revenues as collateral. The agreement is the first in a set of steps that will be required to restore Mozambique’s relations with creditors and international financial institutions, especially the IMF.
We recently also assessed the threat of the Mozambique debts scandal spilling over into Angola, which we continue to monitor (See SPECIAL FEATURE: FALL-OUT OVER MOZAMBIQUE DEBT SCANDAL RISKS SPILL-OVER INTO ANGOLA).
Our analysis and economic forecasts show noticeable discrepancies between national official statistics and forecasts made by international agencies. The manipulation of economic data and the lack of full disclosure of publicly guaranteed loans will weigh on many African countries economic outlook this year and in the longer term.
In January, the IMF downgraded its 2019 sub-Saharan Africa growth projections from 3.8 percent to 3.5 percent. The World Bank is also rather subdued in its assessments, projecting that the sub-Saharan region will grow by no more than 3.4 percent this year. These projections are pushed downward by the muted economic recoveries in some of the continent’s largest economies, including Nigeria and South Africa. Meanwhile, the African Development Bank (AfDB) projects 4 percent growth across Africa, boosted by 4.4 percent growth in the North African region.
The highest growth levels will continue to be located in Anglophone East African countries, alongside the record growth tempo in Ethiopian. The fast developing Francophone West African countries, as well as Ghana, will provide a counter-balance on the other side of the continent, despite Nigeria’s more subdued growth rates. A post-election economic revamp could lift South Africa’s economy with beneficial effects for neighbouring states. In the meantime, the southern African region is expected to remain the continent’s worst performing economy.
A modest recovery in central Africa is unlikely to be sustained and is underpinned by IMF lending facilities to countries like Cameroon and Chad. The North African region is facing a decline as growth slows in Tunisia and remains stagnant in Algeria. Out of Africa’s five biggest economies, only Egypt will see growth rates of over 5 percent, again boosted by sizable loans from the IMF, World Bank and, Gulf states.
Debt sustainability will remain a key concern in Africa in 2019. The IMF warned last year that Africa’s debt-refinancing risks could be substantial over the next two years. The World Bank forecasts at least USD 5 billion in international debt redemptions in sub-Saharan economies this year and over USD 8 billion next year. These figures do not include domestic debt or substantial interest payments on both external and domestic debt.
Proper disclosure of debts and accurate and accountable reporting of economic and financial indicators will be crucial in determining African countries’ balance of payments and their longer term economic outlook. Investors will face higher risks in countries that are suspected of borrowing recklessly or manipulating economic indicators. Moreover, large trade deals, such as the nascent African Continental Free Trade Agreement (ACFTA), could be spoiled if all participating countries do not accurately and transparently disclose all their financial obligations and economic growth numbers.
SEE COUNTRY OUTLOOK: ALL COUNTRIES
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Ahead of the expected ratification of the world’s largest free trade agreement, we assess the divergent economic trajectory on the African continent, as well as persistent concerns over debt sustainability and political risk in some countries.
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