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.
In President Buhari’s second term, the government will continue to prop up the local currency and maintain costly subsidies, policies which have fostered massive fraud and embezzlement and undermined economic recovery. As the budget deficit widens, debt servicing spikes, and some banks again face non-performing loans, there are growing concerns that Nigeria may be running into ‘bankruptcy’. However, oil sector state asset sell-offs might be sufficient, at least in the short term, to stave off another recession or liquidity crisis.
In his second term, President Muhammadu Buhari will again oversee expansive debt-fuelled spending to develop Nigeria’s infrastructure, while seeking a dilution of the government’s stake in the oil sector. He may even consider joining Africa’s free trade pact that came into force in May. However, any firm decisions will take many months before being confirmed, starting with the appointment of a new cabinet and perhaps a reshuffle of the security forces command.
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 violent and disputed electoral process in Rivers State and apparent embezzlement of local development funds have antagonised local communities, which would be exacerbated if the military redeploys into Ogoniland. However, a return to armed insurgency in the Niger Delta currently seems less likely given militant groups’ preoccupation with lucrative oil theft and piracy activities.
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 Islamist insurgency in northeastern Nigeria has continued on a track that is all too familiar. In many ways, the conflict appears to be repeating trends seen in previous years, particularly from 2013 to 2015, when the insurgency flared up dramatically. Should the conflict continue on its current trajectory, the threat may again extend beyond Borno State and Nigeria’s borders.
While the defeated opposition seeks a re-run of the presidential vote and gears up for supplementary state elections, the government of President Buhari is moving ahead with pro-growth economic policies and planning asset sell-offs in the oil sector to finance its gaping budget deficit.
President Buhari’s victory in last week’s presidential elections will be challenged in the courts. Various indicators suggest worse outbreaks of violence are to come across security hotspots in coming weeks, with further unrest expected ahead of upcoming gubernatorial elections.
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