President Buhari seeks to tamper with Nigeria’s judiciary three weeks before hotly contested elections, as his political campaign falters over weak economic management and his credentials on security policy continue to be undermined by ongoing violence in northeastern and central states.
In this open access report, EXX Africa assesses the risk of internet shutdowns and online media restrictions in 2019, identifying the countries and operators most at risk of commercial disruption over the coming year.
So far in 2019, there have been internet shutdowns in at least five African countries, most prominently in Zimbabwe, as well as in the Democratic Republic of Congo (DRC), Gabon, Cameroon, and Sudan. The rate of internet shutdowns has steadily increased over the past few years. According to global digital rights group Access Now, there were 21 shutdowns across Africa last year, up from 13 in 2017. Togo, Sierra Leone, Cameroon, Chad, Ethiopia, Uganda, Zambia, and Egypt were among the countries implementing connectivity restrictions over the past two years. Cameroon’s Anglophone regions spent 230 days without internet access between January 2017 and March 2018.
In this open access special report, EXX Africa assesses the circumstances of recent internet shutdowns and identifies the African countries where the risk of outages will be highest over the course of 2019. This report also assesses the commercial and economic impact of internet shutdowns and the technical processes involved in shutting down an entire country’s connectivity.
PRECEDENT AND LEGAL JUSTIFICATION
While the practice of shutting down the internet is nothing new in Africa, the frequency and duration of shutdowns is steadily increasing. During the 2011 Arab Spring, North African governments regularly orchestrated shutdowns of connectivity and social media. Between 2015 and 2016, most instances of internet shutdowns occurred in West and Central Africa, in countries such as Mali, Chad, Gabon, Republic of Congo, and DRC. Since 2017, the practice has become more common in East Africa and southern Africa.
Governments usually implement these shutdowns through order requests sent to Internet Service Providers (ISP) or telecommunications operators, some of which may be government-owned. Shutdowns are easier to achieve in countries with few ISPs, unlike South Africa which has more than a hundred internet providers. The legal basis of such order requests lies in the contracts that ISPs sign with the communication regulator in each country. Usually, the regulator will have the power to order ISPs to restrict access to the internet or block social media apps at the regulator’s request.
The implementation of such order requests may create a total internet blackout (as most recently in Zimbabwe), or a restriction of access to certain websites, specifically social media (as in Cameroon), or the throttling of bandwidth (as in Sudan). Sometimes, domain name servers can be manipulated to send traffic away from intended destinations and toward servers controlled by the government. African governments have depended on tested practices in China to censor the internet. China is heavily involved in Africa’s internet, with state-backed firms like Huawei and ZTE building internet backbones and other infrastructure for many African countries.
According to Access Now, the top three reasons given for internet shutdowns are public safety, stopping the spreading of illegal content, and national security. However, the legal justification for internet shutdowns is often vague or non-existent. Some governments have in the past denied issuing order requests to ISPs and have instead blamed technical problems, although ISPs are becoming more transparent in announcing government-ordered shutdowns. African governments increasingly link their orders to the necessity to protect the public order, particularly during election cycles or bouts of civil or military unrest.
While internet shutdowns may often violate domestic law, the international legal framework remains vague and relies on assurances protecting the right to freedom of expression or UN Guiding principles on Business and Human Rights. In 2016, the United Nations Human Rights Council released a non-binding resolution condemning intentional disruption of internet access by governments. The resolution reaffirmed that ‘the same rights people have offline must also be protected online.’ However, the non-binding nature of the UN resolution, as well as entrenched internet censorship by countries such as China, has hampered attempts to implement broader prevention of internet shutdowns by governments.
In the absence of a clear framework governing the right to internet access, African governments will maintain their responsibility to protect the public order or to curb ‘fake news’. The below case studies are aimed at finding patterns on internet shutdowns in Africa and to assess the commercial impact of shutdowns.
‘TOTAL’ INTERNET SHUTDOWN IN ZIMBABWE
On 21 January, the High Court said Zimbabwe’s government exceeded its mandate in ordering an internet blackout during recent civilian protests and ordered mobile operators to immediately and unconditionally resume full services. Zimbabwe’s biggest mobile phone operator Econet Wireless subsequently restored all internet and social media services. The sporadic internet blackout was ordered by Security Minister Owen Ncube on 15 January following the start of often violent protests against high fuel prices (See ZIMBABWE: POLITICAL DIVISIONS TAKE HOSTAGE AN ALREADY DISTRESSED ECONOMY).
Many people were left without access to social media platforms and email amid accusations that the government wanted to prevent images of its heavy-handedness from being broadcast around the world. Zimbabwe’s millions-strong diaspora raised the attention of the world to the internet blackout through various social media campaigns that were picked up by traditional media and triggered criticism from foreign governments, such as the UK.
While some internet users sought out virtual private networks (VPN) to bypass the controls, Zimbabwe’s shutdown did cut off crucial access to electronic bank deposits. The cash-strapped government uses such transfers to pay public sector workers, such as teachers, who were already on strike. Moreover, electronic remittances from the large Zimbabwean diaspora were also affected, further exacerbating Zimbabwe’s economic and financial crisis.
Some estimates assess that the shutdown will cost the country USD 5.7 million per day in direct economic costs. However, the widespread international condemnation of the Zimbabwean internet shutdown and the judicial ruling that the service order to ISPs was illegal does mitigate further risk of internet restrictions in 2019.
See Country Outlook: Zimbabwe
SOCIAL MEDIA RESTRICTIONS IN DRC ELECTION CYCLE
The government of DRC President Joseph Kabila shut down internet and text messaging services ahead of and following disputed elections in December, claiming to preserve public order after ‘fictitious results’ were circulated on social media. The government warned of ‘chaos’ in case unofficial results were published on the internet or social media. Diplomats from the US, European Union, Canada, and Switzerland criticised the internet shutdown. The shutdown heightened fears of electoral fraud in presidential and legislative elections that were already marred by delays and violence (See DRC: TENSE PROTRACTED ELECTORAL CYCLE FINALLY COMES TO CONCLUSION).
Data leaked from the state’s electoral commission unambiguously contradicted the official results, triggering a dispute over the election results. The leaked data covers over 80 percent of the votes cast in the 30 December general election and closely matches voting data gathered independently by a parallel vote tabulation held by the Catholic bishops’ organisation, as well as three recent polls.
Internet provider Global and telecom operator Vodacom said that they had cut web access on government orders, although some NGOs claim that interruption to connectivity was being carried out at the discretion of commercial operators. Congolese authorities specifically targeted social media platforms like WhatsApp, Facebook, YouTube, and Skype in order to hamper communication among protesters, while allowing businesses and banks to operate as usual. Nevertheless, disruption to mobile communications was widespread. The economic cost of a shutdown in DRC is estimated at USD3 million per day. The DRC’s restrictions on internet connectivity were similar to those that occurred in recent elections in Mali and Equatorial Guinea, as well as those that followed an attempted military coup in Gabon in early January.
See Country Outlook: DRC
TANZANIA CRACKS DOWN ON ONLINE MEDIA
Some African countries have extended authoritarian practices to the online media sector by amending local legal frameworks. Tanzania’s government is a relevant case study since its implementation of the Electronic and Postal Communications Online Content Regulations Act in March 2018. The new law facilitates the government’s ongoing clamp-down on blogs, online content providers, and users alike with stringent regulatory requirements. These include a USD 924 licensing fee, the disclosure of ‘strategic’ information and the auditing of content by the Tanzania Communications Regulatory Authority (TCRA), failing which transgressors may be subject to severe penalties.
After dealing with the online media sphere, the Tanzanian government has turned its attention to broadcast media, especially foreign-owned companies. Last year, the TCRA threatened to suspend the operating license for the Multichoice and Simbanet television companies. This action follows a string of contentious media-related regulatory measures, beginning with the Media Services Bill and Cybercrime Act. The Act criminalises ‘defamatory’ remarks and content that is deemed ‘seditious’ while authorising greater government oversight. This, in an apparent bid to regulate publicly accessible information so as to manage the narrative on a problematic political and economic agenda.
In targeting such entities with rigid operating requirements and colouring its persecution with nationalist rhetoric such as the ‘my country first initiative’, the government of President John Magufuli stands to gain both politically and economically. This, through increased revenue, royalties and penal payments as well as an appreciation in political stock in a country where economic nationalistic sentiments are still prevalent.
Various other African governments are implementing strict regulations on online media, which may set the tone for future crackdowns on internet connectivity and mobile telecommunications. Last year, Uganda’s government passed a new tax on social media, under which users must pay USD 0.05 a day to use popular platforms like Twitter, Facebook, and WhatsApp. Both Tanzania and Uganda’s restrictive cybercrime and media laws were inspired by similar measures imposed in China.
Other than Tanzania and Uganda, countries where such authoritarian practices are most likely to be implemented over 2019 include Zambia, Zimbabwe, Togo, Senegal, DRC, Guinea, Algeria, and Egypt.
See Country Outlook: Tanzania
RISK OUTLOOK FOR INTERNET SHUTDOWNS IN AFRICA IN 2019
In 2019, a number of countries are likely to impose full or partial internet shutdowns that will pose severe risk of contract frustration to operators, as well as broad economic disruption to investors. Some of these countries will hold highly contested elections this year and have already been identified in EXX Africa’s recent Africa Elections Special Report. More than half of Africa’s 54 countries will hold some form of election next year (See SPECIAL REPORT: TEN KEY AFRICAN ELECTIONS IN 2019).
Other countries, like Tanzania and Uganda, are implementing restrictive cybercrime and media laws to crack down on dissent and protests. EXX Africa has selected the ten countries where the probability of internet shutdowns or other forms of connectivity disruption is highest and where the risk of commercial disruption is most severe.
A 2016 study by the Brookings Institution revealed that shutdowns drained USD 2.4 billion from the global economy between 2015 and 2016. A 2017 report by the Collaboration on International ICT Policy for East and Southern Africa (CIPESA), estimated that sub-Saharan Africa lost up to USD 237 million to internet shutdowns since 2015. Given the rise in internet shutdowns and other forms of connectivity restrictions since then, particularly in Asia and Africa, this number is likely to be far higher in 2019.
The estimated cost of daily economic disruption varies from country to country: Ethiopia’s daily cost is USD 3.5 million, while Cameroon’s shutdown in Anglophone regions results in daily economic losses of USD 1.67 million. Since the shutdowns have become increasingly sophisticated, with governments targeting specific regions or communities, the broader economic costs may be mitigated. In Ethiopia 36 days of national and regional internet shutdowns between 2015 and 2017 cost the country USD 123 million, while Cameroon’s 93-day shutdown in Anglophone regions in 2017 made USD 38 million in total economic losses.
However, the cost would be different for economies with more developed media and IT sectors – a total shutdown in Kenya could potentially cost USD 6.3 million a day (CIPESA). As indicated in our 2019 risk ratings above, the threat of internet shutdowns in large and developed economies such as Kenya or Senegal, is rising. Shutdowns are no longer restricted to small and less developed economies, like those of Chad, Burundi, or DRC.
Activist groups Internet Society and NetBlocks have created a data-driven online tool, The Cost of Shutdown Tool (COST), to better measure the economic cost of internet shutdowns. Greater awareness of shutdowns in Africa, driven by media, governments, business, and NGOs, is expected to facilitate improved assessments of the economic costs, as well as enhanced risk mitigation strategies (like VPNs) to avoid commercial disruption in future.
Amid swirling reports of party intrigues and the possibility of another coup, Zimbabwe’s government is seeking an urgent bailout from key partners like Russia and South Africa. However, no firm financial commitments are expected to be made unless Zimbabwe implements broad structural reform, the prospect of which seems highly unlikely.
The opposition has run out of recourse to challenge the elections results and the threat of widespread post-election violence is gradually subsiding. The incoming government under President Tshisekedi is expected to oversee a moderate economic recovery and to seek the phasing out of international sanctions.
African markets that are opening up to structural reform and painful liberalisation will offer a more favourable investment climate over the coming year, while governments advocating state interventionism and currency manipulation will pose higher risk to foreign investors in 2019.
Every year, EXX Africa selects five countries as its favourite destinations for investment based on commercial interest among our clients and perceptible improvement in the country risk ratings. This selection is based on our local source intelligence, proprietary forecasting methodology, and quantitative risk scoring calculations. The selection showcases some of our key risk forecasts for the year ahead and flags potential new investment and trade opportunities.
Our forecasts take into account drivers of political, security, and economic risk, as well as other key trends that are likely to determine a country’s one-year risk trajectory. We do not base our forecasts on short-term impact incidents such as a failed coup in Gabon, riots in Zimbabwe, or a terrorist attack in Kenya. Rather, we assess the longer term socio-economic and political trends that drive such incidents in the first place.
We also identify those countries where we expect a significant deterioration in the business climate based on political, security, and economic risk drivers. Some countries picked in this year’s report match our selection last year, although there will be some inevitable surprises in the new line-up for EXX Africa winners and losers in 2019.
We wish you a prosperous New Year and trust you may continue to value our Africa risk intelligence.
2019 TOP FIVE INVESTMENT COUNTRIES
It may or may not be surprising that Africa’s largest economies, Nigeria, South Africa, and Egypt, do not feature in our Top Five selection this year. These African economic giants were featured in previous years and all three countries have indeed made significant headway since the recessions of 2016. But hotly contested elections in South Africa and Nigeria have put policy-making on hold. Meanwhile Egypt is already reaping the benefits of relative political stability and steady economic recovery, despite re-emerging security threats. Cote d’Ivoire has also dropped out of our selection, as its economy faces new fiscal pressures and shifting political dynamics. Yet, Angola and Ghana remain firmly in our favourites’ list for this year, while we also take two bets on perhaps more ‘risky’ locations.
Last year, Ethiopia was in our bottom five selection while the country was in the midst of violent ethnic unrest, hard currency shortages, and dwindling economic momentum. This year, the East African nation has shot up the rankings to become our favourite investment destination for 2019. The new administration of Prime Minister Abiy Ahmed has made a symbolic break from perceived past repression, graft, and public mismanagement. The ongoing political transition marks a shift in influence dynamics within powerful state-controlled holding companies and industrial-military conglomerates that have dominated the Ethiopian economy for over 30 years.
However, the success of the Ethiopian political transition will depend on the new government’s ability to seek compromise between established business and security interests and mounting calls for broad political and economic reform. Ongoing hard currency shortages, high inflation, and below target exports will remain key concerns at a time of continued fiscal expansion and dwindling economic momentum. The government seeks private sector participation and foreign investment to stimulate the economy, opening up significant new opportunities. World Bank growth forecasts indicate stabilisation in the next two years just below the 10 percent mark, which keeps Ethiopia among the globe’s top performers. While the business environment remains challenging, the reform-orientated policy agenda suggests potential improvements are likely. The country is also likely to use its expanding goodwill to acquire condition-free multilateral funding to replace expiring Chinese credit lines.
As our favourite investment country of 2018, Angola remains in the Top Five selection this year. Angola’s economy will recover in 2019 on the prospect of rising oil production levels and IMF credit support. The IMF’s recent loan approval will add further legitimacy to the economic reformist trajectory that has been ongoing since President João Lourenço took office in September 2017. With greater observation of macroeconomic fundamentals and policy anchorage, market optimism on an already promising Angolan economy is likely to firm up. An Angolan real economy that is at the early stages of recovery will also benefit from the IMF’s presence via pro-market policies that help facilitate an environment conducive to investment and general expansion. There are immediate opportunities for the Angolan oil and gas sector such as the 2019 bid rounds for onshore and offshore blocks, as concrete steps to reverse the production downward trend.
Yet massive debts at state oil firm Sonangol and the banking sector’s political exposure remain key risks in the medium term. The country’s banks urgently require a round of consolidation to improve asset-quality and foreign-exchange risks. As public debt approaches 70% of gross domestic product, domestic credit is now crucial for state financing. While the new government’s highly popular anti-corruption and economic liberalisation platform is aimed at further diluting the former elite’s political and economic dominance, infrastructure projects will be at heightened risk of cancellation or review.
Ghana will be one of the fastest growing economies in Africa in 2019. The country seeks to replace its dwindling foreign aid receipts as it consolidates its status as a lower-middle income economy. The government will seek to replace these sources of financing by improving revenue collection and raising new debt. With the termination of the IMF programme, Ghana will be able to access debt markets more freely to fill this void. Most of the recent growth is driven by increased output from Ghana’s oil fields, rather than from a more diversified base. The objective is seeking economic diversification through broad-based industrialisation, specifically agro-processing and light manufacturing.
However, a major challenge for Ghana remains its high level of indebtedness. With the debt ratio at around 70% of GDP, the government’s prudence with debt management remains key to the country’s economic prospects. The energy sector, in particular, is heavily burdened by debt, yet long-term energy sustainability is needed to meet growing demand and to facilitate economic growth. Nonetheless, given the apparent recovery and ongoing political stability, investor sentiments are unlikely to change. The absence of key electoral cycles for at least another two years also suggests that fiscal imprudence is unlikely during this period. That said, failure to narrow the deficit and public wage bill discipline, in addition to possible debt accumulation by an expansion-oriented Ghana, could stoke investor anxiety.
Our little surprise for this year’s Top Five – Mauritania is set to emerge as a new economic player in the West African region. Mauritania’s economy is making a strong performance on the back of investments in the mining sector. Iron ore exports and fishing dominate export revenue and the economy is set to grow over the next few years on the back of investments in the mining sector and important gas discoveries. The development of natural gas projects also augurs longer-term sustained growth. Rising export revenues and tax collections are improving the fiscal outlook, despite lingering concerns over debt servicing in the longer term. The current account is strengthening and foreign exchange levels are comfortable as iron ore prices rise. Initial concerns over foreign exchange speculation and inflation have mostly subsided. The IMF predicts a real GDP growth at 8.0%, 8.4% and 7.2%, respectively for 2018 to 2020, along with sizable policy adjustment and favourable commodity price developments.
The looming economic bonanza may still be spoiled by political instability. The upcoming 2019 elections are unlikely to be free and fair, while a heavy-handed security deployment is expected against opposition and activist demonstrations. While the political momentum is shifting in favour of the Islamists and Haratin ethnic group, the military is expected to act to preserve the status quo. As such, underlying political risks may emerge to frustrate contracts signed in the booming extractive sectors.
Perhaps we are calling it too early, but Mozambique has made significant headway since its economic and financial collapse in 2016. President Filipe Nyusi will have to meet three key objectives before elections due at the end of the year in order to turn around the country’s fortunes. Firstly, he will need to implement a peace deal with the armed opposition RENAMO to avoid another outbreak of violence following the vote. Secondly, his government will need to improve its intelligence capability and security response to an intensifying Islamist insurgency in the gas-rich North. Even though militants are targeting rural and remote civilian and security targets in Cabo Delgado province, the prospect of disruption to the nascent natural gas sector is undermining development plans.
Eventual gas revenues will be crucial for the government’s third objective, i.e. ensuring a lasting resolution of the undisclosed debts scandal. Momentum on natural gas development is increasingly motivating debt restructuring and donor reengagement. Mozambique is seeking to extend maturities and share future revenue from offshore gas projects to provide some relief for the budget. A proposed deal with creditors is being motivated by a stronger desire by the Mozambican government to reengage with the IMF, because the state needs billions of dollars in loans to fund its own participation in the gas concessions. Meanwhile, the IMF is considering giving Mozambique a shadow programme, which would be a step towards securing financing from the Fund after the freeze in 2016.
AFRICA’S BIGGEST POTENTIAL LOSERS IN 2019
While we were arguably wrong to include Ethiopia in our Bottom Five country investment selection last year, the investment climate in DRC, Tanzania, and Zambia did significantly deteriorate as we predicted. Indeed, both Tanzania and Zambia retain their least favourable investment rating for 2019, with further deterioration in their political risk climate likely over the next year. Elsewhere, we are particularly concerned that ongoing economic and political crises in Sudan, Zimbabwe, and Gabon may be unsustainable, thus driving heightened risk of political instability, insecurity, and economic collapse. Other countries on our risk indicator watch list for this year include cash-strapped Central African economies and various southern African states that are less likely to benefit from a broader economic recovery elsewhere on the continent.
Since mid-December, violent protests have erupted in Sudanese cities in scenes of unrest that resemble the 2011 ‘Arab Spring’ regional uprisings. What started as an agitation against dire socio-economic conditions, which is attributed to maladministration on the part of President Omar al-Bashir and the governing National Congress Party (NCP), activists have since called for the resignation of the government and the election of a transitional authority. However, President al-Bashir remains steadfast in his pursuance of a fifth term in office at elections 2020 despite mounting resistance both from within the NCP and the opposition.
The lead-up to these elections comes at a time of economic and financial crisis. Depreciated oil prices, in addition to a downturn in production at major refineries, have seen government revenues garnered from its mainstay economic activity plummet. Equally, a decrease in oil production and revenues have left the state with a lack of foreign currency to import fuel and basic commodities, leaving few avenues of respite for a government that is facing an increasingly desperate and agitated population. However, Bashir continues to enjoy the endorsement of the powerful National Intelligence and Security Service which is the guarantor of executive power in Sudan. NISS support may provide a lifeline for al-Bashir through 2019, unless the military or NCP drastically shift their support away from the incumbent. In the meantime, investors will face heightened risks of political instability, widespread insecurity, and non-payment on contracts.
As a result of President John Magufuli’s self-styled ‘economic war’, investor confidence has collapsed driven by the government’s disputes with some of its largest investors. Some aggrieved investors have gone to arbitration to protect their interests under existing contracts. As a result, foreign investment has dropped by more than 30% since 2015 when President Magufuli was elected. Subdued government revenue collection and delays in securing financing for projects have held back development spending and hurt economic growth. Moreover, a sharp fall in lending to the private sector, prompted by high non-performing loans, point to a continued slowdown in growth. Infrastructure projects are likely to be delayed due to subdued government revenue collection and delays in securing financing.
Meanwhile, the president’s allies in the intelligence services are suppressing any form of political opposition to his government’s nationalist policies. President Magufuli has also stacked the key institutions governing the economy with ideologically-aligned loyalists, thus allowing him to stake out his own political turf, separate to the governing party’s interests. All risk indicators are set to deteriorate even further in 2019, as the impact of the new interventionist policies begins to bite. Already a lack of public spending and private sector concerns over policy uncertainty are curtailing growth. The economy will slow in 2019, although Tanzania will still remain one of the fastest growing economies in Africa over the next few years driven by long-term infrastructure commitments.
As President Edgar Lungu focusses on his power extension ambitions, investors are assured long-term policy continuity. However, his government’s authoritarian slide is being replicated in populist economic policy that is rooted in rigid economic nationalism and protectionism. Political in-fighting and legal battles have distracted the government from making the necessary decisions to stimulate the economy and take steps to resolve the critical debt crisis. The role of the IMF lies at the heart of a political power struggle within the PF party-led government. Many Treasury officials have recognised the urgent need for a lending deal with the IMF, yet their plans have been thwarted by presidential advisers who reject the austerity and unpopular subsidy cuts involved in an IMF deal.
Meanwhile, the concerns over Zambia’s debt remain prominent and are frustrating negotiations with the IMF, as well as other creditors including China. The government has maintained a debt-financed infrastructure expansion programme that seeks to run projects in politically important regions of the country. Many recent road, healthcare, and power projects have been politically motivated to ensure local support for Lungu’s power extension ambitions. Such overspending on infrastructure expansion and other politically motivated budgetary items have also triggered allegations of embezzlement and corruption. In the crucial mining sector, a new tax regime is causing smelters to close and motivating mining companies to lay off workers and scrap investment plans. Worse is to come as a harmful new sales tax is due to take effect, while massive VAT rebate arrears are arbitrarily written off.
A failed military coup at the start of the year is indicative of broad socio-economic and political frustration with Gabon’s leadership, which has been weakened by the suspected incapacitation of its strongman president. Even though the military intervention on 7 January failed for all its intent and purposes, there remains a heightened risk of military and civil unrest as long as there is no clarity on the condition of President Bongo and the government does not initiate constitutional provisions for the presidential succession. Opposition leaders in particular may seek to capitalise on the government’s perceived weakness by mobilising their supporters back to the streets. Given the unresolved coup motivations, the prospect of military unrest including mutinies and further coup attempts remains likely. However, the probability of a successful coup remains moderate.
Another factor that has put pressure on Gabon’s political stability is the country’s ongoing economic and financial crisis. Gabon’s economy slowed to 2.1% in 2016, from 3.9% in 2015, while public debt soared and the current account deficit swelled to more than 10% of GDP from a surplus just two years earlier. Growth has since rebounded to a forecasted 2 percent-plus in 2018, from near-zero growth as a result of suppressed oil prices in recent years. However, a sustainable economic recovery seems unlikely, despite assistance from the IMF. The lack of clarity over Bongo’s condition and the succession process have cast doubt over the commitment to reform criteria as set out by the IMF bailout programme.
After an initial period of optimism over Zimbabwe’s political transition over the past year, investors will again face a notable deterioration in risk indicators in 2019. The aftermath of disputed and tainted elections, Zimbabwe’s massive debt burden, and its severe foreign exchange and monetary crisis remain the major obstacles to unlocking substantive flows of private and foreign government finance. Deadly urban protests in January have unearthed the widening political divisions and systemic economic malaise, which the current administration lacks the political clout to resolve. Another military intervention to remove embattled President Emmerson Mnangagwa is increasingly likely this year.
Despite the confidence-inspiring appointment last year of new Finance Minister Mthuli Ncube, he seems out of his depth in the current cash shortage crisis and he lacks the political clout to implement real structural change to the distressed economy. In response to cash shortages, Ncube has pledged to introduce a new currency within 12 months. Such a move will offer little support for businesses struggling to import raw materials and equipment. While the previously forecast 2.4 percent growth rate by the IMF is not out of reach, it will be difficult to attain amid prevailing low-demand, low-investment and high-debt conditions. Debt is particularly concerning given its escalation to over 70 percent of GDP in 2018 and the difficulty associated with clawing back on the figure.
For further comment on these risk forecasts please contact Insight@exxafrica.com
The governing ANC party will seek re-election this year by striking a balance between radical demands from its populist base and mounting investor concerns on debt and corruption. We outline indicators for the pre-election roadmap that should be closely watched over the next few months.
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.
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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.
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