Incoming president Andry Rajoelina will enjoy greater political capital in his second stint at the helm, while his government is at least initially expected to follow an IMF programme as a roadmap for reform. Yet there are growing concerns over corruption, state interventionism, and overspending.
From Nigeria and Algeria, to South Africa and Mozambique – EXX Africa presents a risk snapshot of ten African elections in 2019 which you should not miss. Each election will bring new threats and opportunities well beyond the coming year.
In 2019, Africa will again witness a wave of democratic activity with more than 50 elections scheduled across local, provincial, legislative, and national levels. More than half of Africa’s 54 countries will hold some form of election next year, meaning that investors will be on the lookout for signs of political instability, security risks, contract alteration, and changes to economic policy, or even military interventions. The last few years have taught us that elections in Africa do matter!
Most eyes will be on the polls in Africa’s largest economies, including Nigeria’s presidential election in February and the general election in South Africa in May. Nigeria’s election is more hotly contested than initially anticipated, while shifting political dynamics in South Africa may make the upcoming vote one of the most interesting in years. Some of the most fascinating polls may take place in Tunisia and even Botswana, while the Algerian elections do not seem to augur much immediate political change.
While a number of African elections are not expected to be free and fair, several votes are set to trigger peaceful and democratic transitions of government. In this special report, EXX Africa lists the elections that you should not miss in 2019 as these are likely to make a lasting impact on the political risk outlook for many years to come. Over the course of next year, EXX Africa will continue to monitor all elections across the continent and to generate commercially relevant risk forecasts for our Insight Members.
NIGERIA, GENERAL ELECTIONS, FEBRUARY 2019
Africa’s most hotly anticipated election hits early in the year and the stakes are high! Incumbent President Muhammadu Buhari will face a stronger than anticipated challenge from main opposition candidate Atiku Abubakar. The Abubakar ticket is essentially a pro-business manifesto that is campaigning on implementing economic reform. Abubakar favours an economic liberalisation programme, freely floating the naira currency, and the partial privatisation of the state oil company. In response to the opposition’s pro-business platform, the embattled incumbent is leveraging a strong anti-corruption mandate as an electioneering tool, posing fresh contract risks to investors in key sectors and further uncertainty for oil sector reform.
In order to counter the opposition’s momentum following defections from his governing coalition and allegations of political bias in the Fulani herder-farmer killings, President Buhari is ramping up corruption investigations and prosecutions to convince voters of his probity and zeal for fighting corruption. This will exacerbate government inertia that has so far held up key legislation required to recover Nigeria’s ailing economy. Meanwhile, the government faces various resurfacing security crises, including a resurgence of unrest in the oil-producing Niger Delta, ethnic and sectarian fighting in Middle Belt states, and a continuing insurgence by Islamist militants in the northeast.
SENEGAL, PRESIDENTIAL ELECTIONS, FEBRUARY 2019
President Macky Sall looks set to gain a second term in office at elections in 2019. He has co-opted some opposition parties such as the PS into his governing BBY coalition, while eliminating others, most notably the imprisoned former Dakar mayor Khalifa Sall. The suspension of licenses for NGOs operating in Senegal is likely to trigger a coordinated response by activist groups and opposition parties in the form of protests and boycotts ahead of the February 2019 elections. While these gatherings are unlikely to generate momentum to foment a change in government, they may be disruptive to local business operations.
Despite growing intolerance of dissent and some concern over the electoral process, donors and investment partners remain focussed on Senegal’s record economic growth, forecast at 7% for 2018. The government is also seeking opposition support to amend the constitution to strengthen property and natural resource rights that will serve the planned development of the oil sector. The constitutional amendment will also serve the implementation of the ambitious ‘Plan Sénégal Emergent’, which will drive structural transformation and aims to cement the country’s status as a leading regional hub for business and trade in West Africa. The plan includes broad infrastructure improvements for the mining, tourism, and transport sectors.
MAURITANIA, PRESIDENTIAL ELECTIONS, MARCH 2019 (to be confirmed)
President Abdel Aziz is coming under mounting pressure from his own party following last year’s controversial referendum and he has agreed to step down at the 2019 presidential elections. However, many well-placed sources have refused to believe Abdel Aziz’s stated intentions and claim he is getting ready to purge his own party and to challenge the constitution in order to run for a third term next year. The success of this strategy will depend on maintaining the support of the military, which he is shoring up through support from the US, Algeria, and France in regional counter-terrorism cooperation and high-profile diplomatic outreach initiatives. If his strategy back-fires, the ruling UPR party will be more likely to wrest control away from Abdel Aziz and appoint a party stalwart as his successor.
Mauritania’s economy is making a strong performance on the back of investments in the mining sector and the development of natural gas projects. The country is expected to be 2019’s fastest growing African economy. Rising export revenues and tax collections are improving the fiscal outlook, despite lingering concerns over debt servicing in the longer term. In the hydrocarbons sector, the risk of contract reviews and cancellation is growing for projects that have been slow to develop.
ALGERIA, PRESIDENTIAL ELECTIONS, APRIL 2019
President Abdelaziz Bouteflika is likely to seek a fifth consecutive term in elections slated for April 2019. This indicates that Algeria’s political stakeholders have still not found a suitable successor to replace him. Algeria’s balance of power has been upset recently by a purge of party officials and a series of politically motivated corruption investigations ahead of the elections. Since the 2017 parliamentary elections, Army Chief of Staff Ahmed Gaïd Salah has formed a tentative alliance with Prime Minister Ahmed Ouyahia to hold together Algeria’s political and security establishment, in conjunction with the Bouteflika faction.
While Gaïd Salah is charged with upholding the security of the state, Ouyahia is seeking to repair the distressed oil-dependent economy. Their loyalty to President Bouteflika has allowed the latter’s faction to maintain its dominance, giving huge influence to the president’s brother Saïd Bouteflika and business associates such as Ali Haddad. Yet this alliance will face new pressures following the 2019 elections. Prime Minister Ouyahia’ s planned economic recovery may be undermined in the longer term by inflation and the depreciating value of the Algerian dinar, which would ultimately wreck his chances to succeed Bouteflika. In such a scenario, a succession by Saïd Bouteflika or General Ahmed Gaïd Salah would become more likely, thus posing higher risk of unrest and economic disruption.
SOUTH AFRICA, GENERAL ELECTIONS, MAY 2019
President Cyril Ramaphosa heads an unwieldy and fractious government, whose parliamentary majority is exposed to populist policy initiatives, such as radical land reform. He will struggle to maintain a semblance of unity within his governing ANC party ahead of the 2019 national elections, at which he will be expected to engineer a reversal of the party’s sliding electoral fortunes by boosting his appeal among middle class urban voters. Failure to keep the ANC’s share of the vote above 60% in 2019 will leave Ramaphosa exposed to removal and replacement by rival faction leaders, such as Deputy President David Mabuza who represents a more rural and radical constituency.
In the meantime, the Ramaphosa government will prioritise reining in state spending and restructuring distressed state-owned enterprises. A much vaunted anti-corruption campaign will be limited to high profile associates of former president Jacob Zuma, as Ramaphosa cannot afford to alienate his political backers. Despite fresh business confidence and renewed investor interest in South Africa since Ramaphosa became president in February 2018, many deep-seated structural problems remain, while much-needed economic reforms and other policy initiatives in key sectors like mining will be judged politically inexpedient.
MALAWI, GENERAL ELECTIONS, MAY 2019
Six months ahead of general elections, President Peter Mutharika faces a struggle to secure a second term. The governing Democratic Progressive Party (DPP) has been beset by a split between members aligned to President Mutharika and those backing his former deputy, Saulos Chilima, who have mobilised under the so-called United Transformation Movement (UTM). Meanwhile, former president Joyce Banda will contest the presidency on the ticket of her People’s Party (PP), which she created after breaking away from the ruling DPP in 2011. A third high profile opposition candidate is Lazarus Chakwera, who was the runner up to the 2014 election.
In the absence of any coalitions between the major opposition parties, the election is likely to be a four-horse race. Opposition entities may seek to capitalise on civic society grievances over the ruling administration by adjoining – and possibly catalysing – anti-government gatherings in the coming months. Yet whoever wins the vote, any new government will remain beholden to the IMF and donors to ensure political and economic stability in the longer term. Malawi is expected to stay heavily dependent on donor aid for some time to come, and therefore healthy donor relationships will be of great importance.
BOTSWANA, GENERAL ELECTIONS, OCTOBER 2019
President Mokgweetsi Masisi is unlikely to steer government policy into a significantly different direction until the October 2019 elections. However, he is expected to promote some of his political supporters within the governing Botswana Democratic Party (BDP). Masisi lacks a strong political support base and he may be replaced by his own party in case the BDP fails to achieve a perceived safe margin of victory at the 2019 elections. The BDP’s margin of victory is threatened by the rise of an opposition electoral alliance, the Umbrella for Democratic Change (UDC), which is picking up support among younger and urban-based voters.
The main issue that will concern the upcoming electoral campaign is the state of Botswana’s economy. The long-term difficulty will be to liberalise Botswana’s economy and integrate it into regional and global markets. Previous president Ian Khama’s tenure was marked by increasing protectionism, higher barriers to foreign investment, and immigration restrictions on skilled workers and foreign investors alike. These measures have taken their toll on the economy and employment and flown in the face of advice in favour of diversification and liberalisation. A massive state spending increase on rural economic projects, as envisaged by Masisi, would also have an impact on the budget deficit, which has remained relatively healthy over the past few years.
NAMIBIA, GENERAL ELECTIONS, OCTOBER 2019
President Hage Geingob and his ruling SWAPO party are all but assured of re-election in 2019, as the opposition remains fractious and weak. The implication of this near-complete political dominance is that it allows for the administration to take a longer-term approach to policy-making. A more significant political challenge to Geingob comes from within SWAPO itself. Party policy will be increasingly influenced by populism in the lead up to the 2019 general elections. This is especially the case amid the rise of land activism and the politicisation of the issue by prominent left-leaning politicians.
Namibia’s tentative economic recovery will continue to be suppressed by policy uncertainty over the next year due to confusing political rhetoric on land ownership and local content regulations. While ongoing improvements to the business environment will be welcomed, clarity on land reform and black economic empowerment is not imminently anticipated. Moreover, mounting concerns over debt sustainability and rising fuel prices are likely to mar Namibia’s economic recovery in 2019.
MOZAMBIQUE, GENERAL ELECTIONS, OCTOBER 2019
President Filipe Nyusi will be seeking a second term in office at the October 2019 elections and he is consolidating his power base both within the government and his governing FRELIMO party. He will need to conclude a peace deal with the armed opposition RENAMO before these elections to avoid another outbreak of violence. Yet Nyusi is being challenged by loyalists to his predecessor who seek to undermine negotiations with RENAMO. There is also no immediate hope for a sustained economic recovery as long as there is no resolution on the undisclosed debts scandal.
The IMF expects the economy to grow by only 3% in 2018, and has little confidence that the government will cut spending, while domestic debt continues to rise. Many state-owned enterprises are close to collapse, while the government is failing to pay public salaries. The main hope for Mozambique’s bondholders is the eventual revenues from the nascent natural gas sector, despite the weakness of gas prices and long lead time for liquefied natural gas capital works. The state may only begin to benefit from gas revenues in the 10 or 15 year outlook. Meanwhile, an intensifying Islamist insurgency in the gas-rich North is derailing such plans and causing a regional security emergency.
TUNISIA, PRESIDENTIAL ELECTIONS, DECEMBER 2019
A political stand-off within the ruling coalition is expected to exacerbate the polarisation between partisan supporters ahead of the 2019 elections. At the centre of the dispute is a power struggle between President Essebsi and Prime Minister Chahed, with whom the president shares power in Tunisia’s hybrid political system. Political polarisation is only expected to worsen in the lead up to the presidential elections, in which Essebsi is likely to seek re-election on the Nidaa Tounes party ticket, possibly against the moderate Islamist Ennahda-endorsed Chahed. Preparations for the elections are expected to further distract policy-making and exacerbate efforts to soothe grievances of marginalised communities where the majority of protests have broken out.
Meanwhile, the erosion of foreign reserves to a 15-year low will put at risk Tunisia’s imports of food, energy, and medicines. The government’s ability to service its debt has also been weakened. As fragmentation of the coalition government continues ahead of the elections, the Essebsi administration will be constrained in implementing any meaningful socio-economic reforms until at least after the ballot. Institutional weakening and policy inertia may be viewed by an expectant electorate as ambivalence by the elite towards what are considerable economic grievances, heightening the risk of an extensive protest campaign closer to the polls.
For any further risk analysis on African elections in 2019, please contact your account manager or email Insight@exxafrica.com
Six months ahead of the next national elections, any previous opposition momentum is drifting, while the governing ANC will seek to delay the president’s reform agenda to avoid any serious political backlash at the polls. With South Africa just about pulling out of recession, this short-minded tactic might just pay off.
President Edgar Lungu is gearing up his strategy to remain in office, which will consist of centralising political authority, repressing his critics, and overspending on politically motivated infrastructure and defence sector projects.
The start of politicking for the next set of elections has the potential to impact political stability and the country’s policy agenda. A split in the governing coalition is becoming more likely as President Kenyatta seeks rapprochement with the opposition.
The new government marks its one-year anniversary facing serious obstacles to its economic reform agenda, as well as intensifying political rivalries, which threaten to undermine the prospect of international financing commitments.
The management of Zimbabwe’s economic and monetary policy is becoming the next battleground for rival factions in the ruling party, with allegations that a recent spike in inflation has been engineered to destabilise the government.
The post-election climate has been brightened by a large hydropower investment and a positive economic outlook; however, the threat of insurgency, fragile debt sustainability, and lack of political succession planning will remain longer term threats to stability.
Both presidential campaigns are focussing on building broad-based local political coalitions to ensure victory in 2019, yet slowing investment and frustration of foreign investments are hampering the economic recovery and imperilling the local banking sector.
Ahead of next year’s elections, the government will maintain the political status quo and boost welfare spending in order to curb any outbreaks of unrest; yet falling foreign exchange reserves will determine longer term succession scenarios and pose a nascent threat to repayment schedules as debt balloons.
On 28 October, the head of the governing Front de Libération Nationale (FNL) party, Djamel Ould Abbes, announced that President Abdelaziz Bouteflika will seek a fifth consecutive term in elections slated for April 2019. The 81-year old and frail Bouteflika, whose last public address dates to more than six years ago, has yet to officially announce his candidacy. Several months ago, there were mounting rumours that the head of state may already have passed away or has been further incapacitated since a previous stroke. All major players in Algeria have since called on Bouteflika to stand for a fifth presidential term next year, indicating that they have still not found a suitable successor to replace him.
Presidential brother Saïd Bouteflika has been most vocal in his support for his brother’s fifth term, which has triggered rumours that he still seeks to succeed his brother, despite his lack of popularity by the military and the public. Other contenders for the succession, such as Vice-Minister of Defence and Army Chief of Staff Lieutenant General Ahmed Gaïd Salah, have also fallen into line to support the continuity of power for the next year. Prime Minister Ahmed Ouyahia, who harbours similar succession ambitions, has also supported a fifth term in office for Bouteflika, alongside other senior politicians, union leaders, and generals.
Algeria’s balance of power has been further upset recently by a purge of party officials and a series of politically motivated corruption investigations ahead of next year’s elections. According to local source reports, the judicial and security sector reshuffle was instigated by Saïd Bouteflika and his political and business allies, such as the Forum des chefs d’entreprise (FCE) head Ali Haddad. It seems that key Bouteflika allies are fearing political upheaval next year around the elections and the threat of prosecution against themselves, should President Bouteflika be incapacitated or die in office. A Haddad ally, advertising mogul Mourad Hadj-Saïd is already under investigation for abusive business practices.
The balance of power
Since the 2017 parliamentary elections, Army Chief of Staff Ahmed Gaïd Salah has formed a tentative alliance with Prime Minister Ahmed Ouyahia to hold together Algeria’s political and security establishment, in conjunction with the Bouteflika faction. Prime Minister Ouyahia’s smaller Rassemblement Nationale Démocratique (RND) party has taken up the mantle as the pro-business party in the Algerian parliament. Prominent business leaders and elected RND lawmakers have been pleading for the lifting of export restrictions.
While Gaïd Salah is charged with upholding the security of the state, Ouyahia is seeking to repair the distressed oil-dependent economy. Their loyalty to President Bouteflika has allowed the latter’s faction to maintain its dominance, giving huge influence to the president’s brother Saïd Bouteflika and business associates such as Ali Haddad. These figures have over the past few years taken a cautious embrace of public-private partnerships and lobbied for the partial liberalisation of the country’s economy.
It is therefore unsurprising that the principal influence brokers in Algeria’s power balance have been reluctant to disrupt the status quo by seeking a replacement as head of state. The main arbiter of power between the various factions remains Minister of State and Presidential Counsellor Boualem Bessaieh. Bessaieh, who is likely to play a crucial role in the eventual transition, will have to manage the negotiations for a transfer of power between influential factions. This power play seems to be on hold until at least after the 2019 elections.
As a result of the apparent political stability, Algeria’s economy has benefited from a relative period of political stability. The economy has recently benefited from increased gas output, a relative recovery in the Eurozone, and higher oil prices. State oil company Sonatrach’s chief executive Abdelmoumen Ould has also encouraged improved relations with international oil companies, which has advanced foreign investment. Last month, Italian oil major Eni struck a deal to team up with French major Total to explore oil and gas in Algeria.
Algeria is seeking to increase oil output to boost revenues following a crash in prices in 2014. The recent rebound in prices has allowed Sonatrach to invest in petrochemicals, unconventional, and offshore exploration. Eni has also agreed with Sonatrach to take a 49 percent stake in three oil blocks in the North Berkine basin which are estimated to hold 145 million barrels of oil. France’s Total has also signed a USD1.5 billion petrochemical deal with Sonatrach, recently stating that its confidence in Algeria’s oil industry had been restored.
Algeria’s economy has therefore been making a steady recovery from its near-collapse in 2014. Annual inflation fell to 4.7 percent in September from 4.8 percent the previous month after a slight decline in price of some foodstuffs. The country has been trying to boost domestic output and cut imports in an attempt to cope with financial pressures caused by a fall in energy earnings since 2014.
Energy earnings rose 14.86 percent in the first nine months of 2018 from the same period a year ago, reducing the country’s trade deficit by 56.71 percent. Oil and gas exports, which accounted for 93.08 percent of total sales abroad, reached USD27.93 billion, up from USD24.32 billion in January-September 2017. The overall value of exports reached USD30.012 billion against USD25.697 billion in the first nine months of 2017, while imports fell 1.52 percent to USD33.703 billion. The government has imposed import restrictions for some products in a bid to cut spending on purchases from abroad. In addition to import controls, the ‘51/49 rule’, which limits foreign participation in any energy project’s equity, is expected to remain in place.
The threat of political uncertainty over the succession and the upheaval caused by the reshuffles and corruption probes are likely to be intensified by socio-economic grievances which are again rearing their head. Frustrated young urban populations are becoming increasingly critical of the political power play, corruption, and cronyism in Algeria’s elite. Meanwhile, the economic recovery has failed to take hold among Algeria’s urban youths, threatening liberalizing reforms pushed through by Ouyahia’s government over the past year.
Algerians complain of the erosion of their purchasing power as prices have risen and their currency has depreciated, recalling the strikes staged this year by thousands of doctors and teachers for better pay and working conditions. As to Algeria’s economic liberalization, it remains selective, tightly managed and potentially reversible if oil prices rise or if Bouteflika is no longer president. It is likely that the country’s efforts and commitment to diversify its economy will weaken if oil prices continued to rise in the global market.
The government will seek to avoid any policies that would risk triggering fresh anti-austerity protests. Therefore, Prime Minister Ouyahia is unlikely to implement the spending cuts required by the International Monetary Fund (IMF). Instead, he will continue to fund the ballooning budget deficit with quantitative easing by the central bank. Nevertheless, spontaneous riots and protests over issues like unemployment or proposed subsidy reform remain a present risk. The government remains deeply wary of social unrest threatening the stability of the state and of Islamist influence, and is proactive in using public expenditure and highly capable security forces to discourage protests.
If protests did escalate and become co-ordinated in major cities – involving tens of thousands of people or shutdown of key infrastructure such as ports – the army would have to decide whether to use force to suppress them, potentially inflaming the situation and leading to a popular rejection of the army, or to oust the civilian leadership and call fresh elections. We consider such a scenario unlikely for 2018/19.
It is unlikely that civil unrest will pose a serious threat to political stability ahead of the elections. Instead, such unrest may become more prevalent following any eventual transition from President Bouteflika. For Prime Minister Ouyahia, implementing a successful and broad-based economic recovery will be crucial for his succession ambitions. A succession by Ouyahia under a revived economy would be the lowest risk scenario following next year’s elections. However, there remain serious challenges ahead.
The government has reversed plans to cut the budget and will continue high-level spending in the upcoming election year. In September, The government released a draft budget of USD71.9 billion for 2019, which would finance free housing programmes, agricultural and water development, infrastructure and subsidies on consumer goods. It would result in a deficit equal to 9.2% of GDP.
The rise of oil prices has been a boon to Algeria’s economy, emboldening the government to keep up its high spending. Algeria’s government adopted what is known as an “easy money” approach, using the Central Bank to buy assets, including government debt with long-term maturity, to finance the deficit and high spending of 2018.
However, continued high spending into next year is likely to fuel an increase in imports, causing the country’s foreign currency reserves to shrink and prompting it to borrow from abroad, a trend the government has struggled to avoid so far. The Finance Ministry said it expects current account deficits of USD17.9 billion in 2019, USD14.5 billion for the year after and USD14 billion in 2021. However those estimates seem unrealistic as foreign exchange reserves shrink due to the continued high social welfare spending.
Based on independent estimates, foreign currency reserves will fall to USD62.5 billion in 2019, then USD47.8 billion for 2020, and USD33.8 billion for the following year. The government has previously vowed to keep foreign currency reserves lower than USD100 billion, which now seems effectively impossible. As a result, the Algerian government is expected to seek additional foreign debt to finance next year’s election budget, as well as future sending commitments.
The Central Bank of Algeria allocated loans of more than USD 80 billion to public and private sectors in the first half of 2018, a 6 percent increase compared with a year ago. More than 54 percent of the loans are long-term credits allocated to state-run companies in the hydrocarbons sector. Loans allocated to the private sector amounted to some USD40 billion, with an increase of 4.3 percent over the same period last year.
As a result, Prime Minister Ouyahia’ s planned economic recovery may be undermined in the longer term by inflation and the depreciating value of the Algerian dinar, which would ultimately wreck his chances to succeed Bouteflika. In such a scenario, a succession by Saïd Bouteflika or General Ahmed Gaïd Salah would become more likely, thus posing higher risk of unrest and economic disruption.
SEE COUNTRY OUTLOOK: ALGERIA
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