While the South African economy is again stuck in a deep recession and measures aimed at fiscal consolidation are stalled, the new administration may have achieved sufficiently firm institutional gains to stave off a third sovereign credit rating downgrade by Moody’s in October.
In the first six months of its administration, the new government had taken a measured and pragmatic approach to pursue internal and external peace, enhanced political pluralism, and economic privatisation, yet remains challenged by both socio-political and institutional pressures.
The ongoing contract frustration experienced by telecoms firm MTN in Nigeria and the threat of punitive action against banks such as HSBC are highly indicative of intensifying populist and politically motivated rhetoric against foreign investors ahead of next year’s elections.
The newly elected president has consolidated his political authority through shaking up the cabinet, while he is sending a reformist message to creditors that he will prioritise growth as a mechanism for development, beginning with measures to stabilise the country’s precarious fiscal and monetary positions.
A booming economy and improved governance are creating fresh opportunities for project finance deals. While the economic and financial outlook is relatively strong, there are emerging concerns over political patronage and contract discrimination under the current administration.
Desperately searching for fresh funds to service its mounting debt burden, the cash-strapped government has stopped paying public salaries and repaying VAT rebates to mining firms, while offering state assets as collateral for new loans.
The new government will seek international re-engagement, political conciliation, and economic recovery, while taking a measured approach, prioritising less disruptive policy, and personnel changes and gradually moving toward more comprehensive change.
Despite a political agreement between the government and opposition, political, industrial, and labour disputes will continue to drive high risk of disruptive and potentially violent protests across the country.
The future of Zimbabwe’s political stability and the country’s significant investment potential rest on the outcome of a judicial challenge to last month’s disputed elections and the respective parties’ reaction to any verdict.
On the one year anniversary of Angola’s political transition, there are growing indications that initial investor optimism has waned due to a persistently weak economy, rising debt levels, and fresh allegations of state corruption.
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