President Ramaphosa’s ANC is set to reverse a trend of electoral decline at general elections in three weeks, despite the party’s record of entrenched corruption, economic mismanagement, and political in-fighting. In this special report, we look beyond those elections and forecast the key drivers of political, security, and economic risk for Africa’s most developed economy in the post-elections climate.
Algeria’s military has forced the resignation of the president and will seek a continuation of its power base following elections due by the end of June. The army’s ability to negotiate a new political agreement with the opposition and protest leaders will be key in its success to ensure stability and mitigate further commercial disruption.
After five weeks of mass demonstrations, the embattled political elite is showing no signs of giving into the protestors’ demands. The next five weeks will prove crucial in determining Algeria’s political, security, and economic outlook for years to come. EXX Africa assesses the main pathways on how the crisis is likely to unfold and what this means for foreign investments and key sectors.
The probability of an opposition victory in upcoming elections is increasing, which raises the risk of corruption probes and contract renegotiations after the polls. However, the incumbent will use new legislation and control over security forces to push back against the opposition’s momentum, thus raising the risk of political violence in coming months.
The potential resolution of a years-long dispute over the world’s largest untapped iron ore resource does not immediately signal its development due to the project’s massive infrastructure costs. Despite a booming bauxite and gold sector, populist sentiment ahead of the 2020 elections will increase risk of contract frustration and industrial action.
Facing the most significant outbreak of unrest in almost a decade, the Algerian government is under pressure to part ways with its long-standing president. In light of the enduring state of political paralysis and with no credible opposition as an alternative, we assess the possible trajectory of the protest movement and the potential for violent escalation.
Over the next three months, the threat of protracted labour action at mining companies and public utilities will increase, while instances of suspected ‘economic sabotage’ and more frequent political unrest will raise the risk of commercial disruption to export sectors.
Political rivalries have been put on hold until after the April elections, while fresh welfare spending should curb outbreaks of unrest. Yet the post-elections economic outlook remains marred by falling foreign exchange reserves and poor repayment schedules as debt balloons.
Any negotiated resolution of the political crisis now seems remote as the opposition unites, while security forces fracture, indicating a growing probability of regime change in coming months. Despite questionable reports of slowing inflation, the economic crisis is fast deteriorating and poses severe risk of debt distress.
On 13 February, Sudan’s main opposition groups united for the first time since protests erupted last November to issue a joint call for President Omar al-Bashir to step down. The Sudanese Professionals Association (SPA), a group of trade unionists who have been leading some of the protests, was joined by the country’s three main opposition coalitions at a joint news conference, calling for the government to step down and to pave the way for four-year transitional governance followed by elections.
The SPA hosted senior leaders of the National Consensus Alliance, Sudan Call, and the Unionist Gathering. The groups issued a joint declaration calling on the removal of President al-Bashir, although this event marked the first time the disparate groups all joined together since protests began on 19 December.
The opposition’s joint statement is critically important as an indicator for political stability. It is rare for Sudan’s Islamist and non-Islamist opposition parties to collaborate, let alone unite in their calls for regime change. In our previous analysis on the Sudan political crisis, we assessed that any collaboration between the usually fractured opposition would be a strong indicator showing that the government faces an immediate challenge to its stability. There is precedent for such indicators, firstly in 1964 when protesters ousted the military dictatorship of Ibrahim Abboud and in the 1985 protests that ended the May Regime of Jafa’ar Nimeiri.
The day after the joint press conference, on 14 February, the opposition united on the streets of the capital Khartoum and staged protests near the presidential palace. Security forces in plainclothes and police officers used heavy-handed tactics to disperse the demonstration. The Sudanese government has confirmed the deaths of 31 people in the course of the protests, but other credible reports including from Human Rights Watch say more than 51 persons have been killed. An opposition-linked doctors’ syndicate said last week that 57 people have been killed in the protests.
Fractured security forces indicate risk of mutinies
A unified opposition is another key indicator for political instability, since we reported on divisions between the military and intelligence agencies last month. Member of Sudan’s powerful National Intelligence and Security Service (NISS) have been engaging in small outbreaks of fighting with members of the service and army troops in localised incidents over the past few weeks. As we assessed in early December, discontent with the continuation of Bashir’s political reign has encroached into the rank-and-file of the SAF, posing heightened risk of mutinies and potential coups against the government.
Meanwhile, there are growing indications that NISS commander Salah Gosh or Muhammad Hamdan Dagalo, who commands the RSF, could end their support for al-Bashir. In such a scenario, the probability of mutinies and perhaps a military coup instigated by junior and middle-ranking SAF officers would become more likely (See SUDAN: RIFT WITHIN SECURITY FORCES IMPERILS POLITICAL STABILITY AMID ECONOMIC CRISIS).
In case of a loss of NISS support, the government would lose its first line of defence against the protesters and face a potential spree of mutinies in military ranks. The military plays a more important role in combating armed rebel movements that form part of the opposition coalitions. The current uprising has seen collaboration between regional armed movements and urban civil opposition. Any perceived weakness in the military could also resume the insurgencies in the Darfur region and the states of Blue Nile and South Kordofan, including those fought by the Justice and Equality Movement (JEM), which is part of the wider Sudanese Revolutionary Front (SRF) collective.
A resumption of conflict and insecurity in these regions – particularly in Darfur, which will be left vulnerable given the African Union/United Nations peacekeeping mission (UNAMID) withdrawal – could compromise a key tenet of the full sanctions removal that focuses on maintaining internal peace in Sudan. However, a full-scale return to hostilities in Sudan’s conflict zones is not expected at this time. Rebel groups operating in southern Sudan no longer enjoy the patronage of South Sudan and neighbouring states, which severely impacts their operational capabilities. Moreover, the leadership structures of non-state armed groups are likely to enjoy political and financial concessions in exchange for their involvement in a peace agreement.
Manipulation of official inflation numbers
The Sudanese economy is showing of further deterioration as the protests continue. The Sudanese pound has fallen to a record low on the black market, selling for 70 Sudanese pounds for cash transactions on the morning of 14 February, compared to 65 pounds at the start of the week, 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 days has been triggered by cash shortages following a run on the banks, as depositors fear the protests are gaining momentum since the opposition’s joint statement. 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 economic report, we considered that Sudan is firmly in debt distress and poses highest risk of debt unsustainability (See SPECIAL REPORT: AFRICA ECONOMIC OUTLOOK IN 2019). In January’s investment risk report, we identified Sudan as the worst destination in Africa (See AFRICA INVESTMENT RISK REPORT 2019).
The unification of the usually fractured and disparate opposition marks a critical turning point in the Sudan protest movement and has raised the prospect of a so-called ‘Sudanese Spring’ over the next few months. Opposition forces will now be able to coordinate demonstrations more coherently and increase international attention on the political crisis facing the country. Many western governments have so far failed to recognise the protests as a popular, peaceful, and genuine grassroots uprising. Many of these governments continue to believe that al-Bashir will weather the storm and that his regime will continue to serve their respective strategic interests in Sudan, such as providing a partner to combat Islamist militancy in the region.
As a result of a unified opposition, the risk of violent protests across Sudanese urban centres will remain severe at least in the coming weeks. Security forces will continue to use tear gas, stun grenades, and live ammunition against demonstrations, posing risk of death and injury to bystanders. Unless protest fatigue sets in, the crisis may still reach an escalation point as the NCP-led parliament proceeds with a proposal to amend the Sudanese constitution to allow President Bashir to run for another term in office in 2020.
Meanwhile, security forces will become more supportive of the opposition demonstrators, which will be further motivated by divisions between the intelligence agencies and the military. The prospect of soldiers joining the protesters, staging mutinies, or attempting an unconstitutional transfer of power will increase as the protests roll on. Increased fighting between the military and the NISS intelligence agency would become an indicator for potential civil war in case the political and economic crisis drags on well into 2019.
The economic crisis shows little sign of improvement. There is no immediate resolution to Sudan’s fast deteriorating economic and financial crisis. The closure of the country’s fuel refineries, combined with exhausted foreign reserves, has led to chronic fuel shortages across Sudan and left the bankrupt Bashir administration with minimal avenues of recourse.
The government is making urgent overtures to end the economic crisis, before allowing it to spiral further out of its control and to risk alienating the security forces even more. However, lines of credit and other forms of financial support are fast drying out. Local sources report that the government is urgently seeking further financial support from Gulf nations, such as Saudi Arabia and the UAE. Sudan’s central bank has previously received deposits from the UAE, likely in exchange for military and logistical support for the Saudi-led offensive in Yemen. Yet the extent of any further support is far from certain as Bashir’s allies witness a deterioration in the crisis and little prospect of a resolution.
Attempts to secure new foreign funding from Saudi Arabia and the UAE would provide some temporary relief. However, a real change in the economic situation in Sudan is not anticipated at this time. Remedying the challenges requires significant fiscal reform which would necessitate a cut in government spending to the defence sector that would be unpalatable to the Bashir administration. Indeed, attempts at remedying Sudan economic situation by redirecting military funds could threaten Bashir’s position.
SEE COUNTRY OUTLOOK: SUDAN
As South Africa faces another round of scheduled power outages, reduced output from energy intensive sectors will put further pressure on an already bleak economic outlook. Meanwhile, labour opposition to power sector restructuring plans undermines the government’s reform plans and efforts to avoid another credit rating downgrade.
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- NIGERIA: RISK OUTLOOK FOR A NEW NIGER DELTA INSURGENCY
- BOTSWANA: POLITICAL RIVALRY, GRAFT SCANDALS, AND INEQUALITY MARK THE ROAD TO ELECTIONS
- SIERRA LEONE: GOVERNMENT MARKS ONE YEAR IN OFFICE WITH A MIXED RECORD
- SPECIAL REPORT: POST-ELECTIONS POLITICAL AND ECONOMIC FORECAST FOR SOUTH AFRICA