A shock to global oil prices leaves many African markets unprepared for more expensive import bills, while some crude producers may struggle to reap the benefits of higher oil export revenues. EXX Africa assesses the risk outlook for Africa’s largest oil producers and the continent’s main fuel importers.
The latest outbreak of anti-immigrant violence in South Africa has been unusual only because of its timing coinciding with a major investment conference and the potential political motivations behind the attacks on foreigners. EXX Africa investigates the political and economic drivers of such violence, as well as the commercial impact of retaliatory action against South African interests elsewhere in Africa.
With 54 countries and a continental coastline of 30,500 km that spans the Mediterranean sea in the north, the Suez Canal and the Red Sea in the northeast, the Indian Ocean in the east, and the Atlantic Ocean in the west, Africa’s borders are both numerous and vulnerable. EXX Africa delves into the primary threat actors taking advantage of these vulnerabilities to further their own objectives across the continent. The report will be submitted the United Nations General Assembly this month and is pre-released to our clients ahead of the publication.
EXX Africa takes a closer look at the idiosyncrasies of some of the prominent internet shutdowns on the continent over the last year, exploring the causes and consequences of this repressive technological tactic.
The use of internet shutdowns by African governments to suppress popular dissent is becoming increasingly common. So far in 2019, there have already been reports of internet shutdowns in at least 12 countries. The states most affected usually have few internet providers, which makes it easier to implement a ban. Although such shutdowns may be contrary to local law, they are often detrimentally effective before they can be challenged in court. Furthermore, there is a lack of a binding international legal framework to hinder governments from acting with impunity.
These partial or near-total internet blackouts are most often implemented in anticipation, or in the wake, of anti-government protests, particularly around elections. However, governments also use targeted blocking of certain websites to restrict access to specific information during critical periods, such as national examinations. We explore some recent case studies from the past 12 months in this latest briefing. We also examine the impact such shutdowns have on commercial operations and the wider economy in African countries.
This briefing follows on from EXX Africa’s special report published at the beginning of the year and updates the key forecasts established in that report (See SPECIAL REPORT: THE COST OF INTERNET SHUTDOWNS IN AFRICA).
Sudan: Prolonged shutdowns to control unrest
Internet blackouts have become a staple during the past 12 months in Sudan, particularly from December to April as protesters took to the streets to oust former president Omar Al Bashir from power. During this period, the government intermittently blocked access to Facebook, Twitter, Instagram, and Whatsapp. However, it was the near-total shutdown instituted in June until July, following particularly violent unrest in the capital, which garnered the most attention (See SUDAN: HARD-LINE DARFURI MILITIA SEIZE CONTROL OF THE CAPITAL).
On 3 June, the Sudanese Transition Military Council ordered a partial internet shutdown amidst reported paramilitary attacks on pro-democracy demonstrators in Khartoum, during which an estimated 100 people were killed. To begin with, the ban targeted mobile networks before escalating to encompass fixed-line connections on 6 June. From 6 June to 9 July, a near-complete blackout was implemented, cutting the population off from the outside world. According to NetBlocks, a web freedom group, the internet disruptions under the rule of the Council were “more severe” than those imposed under Al Bashir at the time.
The Council’s actions contributed to significant condemnation from local and international watchdogs, in turn spurring social media campaigns. For example, throughout June, international social media campaigns, #BlueForSudan and #IAmTheSudanRevolution, were launched in an attempt to gain attention for the massacres and censorship being perpetrated in Sudan.
Locally, a lawyer, Abdel-Adheem Hassan, challenged the shutdown in court. On 23 June, Hassan was successful in ordering his telecoms operator, Zain Sudan, to restore connectivity. Yet, while his win was widely publicised and celebrated in the belief that the internet would be restored countrywide the next day, the operator only restored connection to his personal line.
According to Human Rights Watch, the near-total blackout in Sudan resulted in “wide-ranging harm”. Notably, it prevented activists and residents from reporting critical information regarding paramilitary forces, who were responsible for the attacks in Khartoum and previously for violent campaigns in Darfur, Southern Kordofan and the Blue Nile. Medical professionals further added that it made it difficult to organise ways to provide care.
The internet was only fully restored on 9 July after a further court challenge and a formal denouncement of the shutdown by the UN.
Chad: The longest night
Although Chad has a very low internet penetration rate – with only 6.5 percent of the population reported as having access to the internet as of 2017 – the country was recently subjected to the longest-running internet blackout on the continent. In March 2018, President Idriss Déby announced a partial internet block that affected major sites including WhatsApp, Twitter, Instagram, YouTube, and Facebook, as he prepared to amend the constitution to remain in office until 2033. Sixteen months later, the ban was lifted on 13 July 2019 (See CHAD: CREATING A DE FACTO MONARCHY AMID MULTIPLE CHALLENGES TO POLITICAL STABILITY).
According to the government, the ban was implemented for security concerns over terrorism threats. While this justification was challenged in local courts, all appeals were ultimately unsuccessful. The government only lifted the ban following a sustained international campaign, led by Internet without Borders, which included diplomatic pressure, protest action, as well as the sponsorship of VPN access for Chadians.
Long-term social media blackouts are common in Chad. Previously, in 2017, the government cut connections for ten months following controversial elections. These long periods of internet blackouts have severe economic consequences for the already impoverished country. According to the ‘Cost of Shutdown Tool’ by NetBlocks, the 2017 blackout cost the government an estimated USD 163 million. It is estimated that the most recent blackout cost upwards of USD 253 million.
Moreover, during the blackout, the country’s largest ISP, Millicom, a Swedish telecommunications company, was subject to substantial adverse media in Sweden regarding the company’s alleged failure to honour its UN commitments to protect free expression. In the early days of the blackout, the company claimed that the outage was due to technical problems before later admitting that the government had ordered the blackout. In June 2019, Millicom completed the sale of its operations in Chad to Maroc Telecom, a Moroccan telecommunication company. Although part of wider strategic disinvestment from Africa, Millicom’s withdrawal was likely impacted by the reputational damage it faced following the Chad blackout.
Mauritania: Internet shutdowns and propaganda campaigns
Mauritania held its presidential elections on 22 June. When violent protests broke out on 23 and 24 June in the capital Nouakchott, challenging the initial election results, the government moved to disrupt the internet before instituting a near-complete ban on both mobile data and fixed-line connections by 25 June. All of Mauritania’s consumer ISPs – Mauritel, Chinguitel, and Mattel – were impacted by the government’s decision.
By suppressing social and news media, the government was able to provide its own account of the protests through a false propaganda campaign. On 26 June, the state television broadcaster paraded a group of foreign nationals who alleged to take full responsibility for the protests. Only after the internet services were fully restored on 3 July did a more accurate picture of the post-election situation emerge.
Contrary to state propaganda, a number of Mauritanian political activists were reported to have been arrested for participating in the protests. Moreover, it was revealed that during the blackout, the state had detained two prominent journalists without charges. Lastly, once connectivity had resumed, delayed reports of civil unrest in the immediate aftermath of the elections from outlying rural areas began to emerge (See MAURITANIA: NATURAL GAS AND MINING BONANZA WILL MITIGATE INVESTMENT RISKS).
Ethiopia and Somalia: Shutdowns for exams
Internet shutdowns are not always instituted for political reasons. In Ethiopia and Somalia, they have also been implemented during national exams to prevent cheating. While internet access is occasionally restored in the evenings during these periods, the impact of such shutdowns is significant. According to Netblocks, a one-day shutdown of the internet costs Ethiopia at least USD 4.5 million and has a long-term impact on investor confidence in the host country.
The latter is particularly true in the case of Ethiopia as newly elected Prime Minister Abiy Ahmed has sought to privatise the national telecommunications provider, Ethio Telecom. Nevertheless, while such government interference is likely to concern potential investors, the anticipated establishment of an independent regulator is expected to provide appropriate checks and balances (See
Countries to watch
Protests in Zimbabwe have also been met with internet shutdowns in recent months. In January 2019, for example, the government imposed a “total internet shutdown” amid violent protests against a dramatic fuel price increase. Access to the internet and social media apps like Facebook, Twitter and WhatsApp were intermittently blocked as the country’s largest telecom company, Econet, sent customers text messages relaying the government’s orders and calling the situation “beyond our reasonable control”. As the situation has continued to decline over the past few months, with reports of load shedding of up to 16 hours a day, food shortages, and the outlawing of anti-government protests, further unrest and associated internet clampdowns are expected.
Tunisia is scheduled to hold the first round of its presidential elections on 15 September 2019. The country has enjoyed relatively free access to the internet since widespread blackouts during the Arab Spring in 2011. After transitioning into a democracy, a key test for the budding democracy will be whether or not these elections are free and fair. Any internet shutdowns during the election season, which the government would likely justify by appealing to the threat of terrorism, will instead be an indication of the state’s democratic integrity.
Burundi is expected to hold presidential and parliamentary elections in May and June 2020. In 2015, as President Pierre Nkurunziza, sought to seek a third term ahead of the country’s elections, messaging services including Facebook, Whatsapp,Twitter, and Tango were shutdown. Actions by the government since then have further pointed to little tolerance for media freedom. In March 2019, for example, the government renewed its suspension of Voice of America and withdrew the BBC’s operating license. As such, it is highly likely that next year’s elections will be accompanied by an internet shutdown and near-total blackout.
Tanzania is expected to hold multiple elections in 2020, including presidential and parliamentary votes. With current President John Magufuli having cracked down on online media over the last year (See EXX Africa Special Report: The Cost of Internet Shutdowns in Africa) it is likely that he may move to control messaging ahead of and during the elections by implementing partial bans on the internet and removal of anti-government sites. Indeed, during an August 2017 meeting with leaders from China, the Tanzanian Deputy Communications Minister praised his counterpart for blocking social media platforms and replacing them with “homegrown sites that are safe, constructive and popular”.
Each case of those in power using internet blackouts to control information, and therefore people, has its particularities. However, one constant in all of these cases is the economic impact of the blackouts at both a macro- and micro-economic level. Decreased productivity, lack of email communication, disruption to online sales, decreased online advertising; these are a few examples of the consequences of internet shutdowns for commercial entities. At a national level, a recent Global Network Initiative report indicates that the loss of internet connectivity has a pronounced effect on a country’s daily GDP. The report estimates that an average high-connectivity country stands to lose at least 1.9 percent of its daily GDP for each day of a total internet shutdown. For an average medium-level connectivity country, the loss is estimated at one percent of daily GDP, and for an average low-connectivity country, the loss is estimated at 0.4 percent of daily GDP.
Activist groups like NetBlocks and Global Network Initiative are creating awareness of both the prevalence of internet shutdowns around the world and their associated economic impact. This awareness is vital for the media, NGOs, and international organisations to try to combat the increased use of shutdowns across the African continent. Indeed, internet access and the guarding against the abuse of it by those in power are fast becoming a key frontier for the protection of international human rights. However, the fight against the abuse of freedom of expression is expected to be prolonged in Africa, as more and more leaders are turning to this form of control to suppress dissent and manipulate access to information. In the interim, businesses and the wider economy are expected to bear the brunt of these decisions.
SEE COUNTRY OUTLOOK: ALL COUNTRIES
Just weeks away from publishing its much-anticipated master plan for the struggling power sector, the government is considering prescribing financial assets and forcing pension funds and banks to invest in state utilities’ debt as an alternative to seeking IMF support. However, the government’s intention to renew nuclear power capability may be more considered and economically prudent than previous nuclear procurement plans.
State-owned enterprises in Africa have a notorious reputation for being mismanaged and for repeatedly requiring financial bailouts. EXX Africa unpacks this notion by looking at some of the best and worst-performing entities across the continent. Our analysis spans from examples in Morocco, Ghana, and Ethiopia to Zambia and South Africa.
The embattled central bank has for now ruled out an outreach to the IMF despite weak growth, a plummeting currency, and rising debt. The government will need to make progress on restructuring public companies, attracting investment, and retaining its only investment grade credit rating, while also battling its political opponents that seek the ouster of President Ramaphosa by 2022.
EXX Africa explores Russia’s growing influence in Africa. We look at the drivers of this foreign policy shift, the locations of interest, and the implications for traditional players across the continent.
At the end of this year, in October 2019, Russia will host its very first Russia-Africa Summit, which will bring together more than 50 African leaders in Sochi. While Russian influence across the continent is nothing new, as the former Soviet Union enjoyed extensive support among many African nations throughout the Cold War, there has been a notable shift in its focus over the past half-decade. We explore the nature of this shift and the strategic objectives behind Russia’s engagements with select countries. We further look at how Russia fares against other global powers in this latest ‘scramble’.
Russian influence across the continent is not unprecedented. From 1960 until the end of the Cold War, the former Soviet Union supported liberation movements in Algeria, Angola, the DRC, Ethiopia, Guinea, Morocco and South Africa, among others. However, with the collapse of the Soviet Union in 1991, these relations faded. Indeed, throughout the next decade, Africa experienced a so-called ‘third wave of democratisation’ during which Vladimir Putin showed limited interest in Africa.
This outlook changed significantly after 2014. With the Russian annexation of Crimea in Ukraine, relations with the West reached its lowest point since the Cold War. The US and EU responded to Russian expansionist policies in Eastern Europe by implementing sanctions against the regime, while both sides of the dispute engaged in a military build-up.
In response to actions from the West, Russia amended its foreign policy to establish strategic ties outside of the West and to insulate its economy against ongoing sanctions. As a part of this, Russia established new economic and security ties with South Asia, the Middle East, South America and indeed, Africa.
The Africa pivot
According to leaked documents obtained by the Dossier Centre, a London-based investigative unit, Russia’s pivot towards the continent typically involves a deal in which it offers some level of political or security support to African leaders in return for various concessions, such as in mining, oil and gas, arms or infrastructure contracts. Through these deals, Russia also establishes close personal ties with various heads of state and upcoming leaders, ensuring longevity to its plan.
The man reportedly driving this shift to Africa is known as Yevgeny Prigozhin, a businessman and close ally of Putin who is believed to be a funder of Wagner Group: a private military contractor with a presence in Africa. According to the leaked documents, Prigozhin has identified various countries with which Russia is seeking to bolster relations through political and economic ties, police training, media and humanitarian projects, and “rivalry with France”. Each country is ranked out of five in terms of priority with five being the highest level, and one the lowest.
The following countries are identified as part of this shift, according to the leaked documents:
― Rank five: Central African Republic (CAR), Sudan and Madagascar
― Rank four: Libya, Zimbabwe, and South Africa
― Rank three: South Sudan
― Rank two: the DRC, Chad and Zambia
― Countries cited where Russia “plans to work”: Uganda, Equatorial Guinea and Mali
― Countries cited “where cooperation is possible”: Ethiopia
― Countries cited as “traditionally supportive”: Egypt
We explore the nature of these relations and the impact on Western interests in some of these countries of interest.
Central African Republic – Rank Five
Russian influence in the CAR – a former French colony – failed to garner much attention until July 2018 when it was reported that three Russian journalists had been killed around 180km from the capital, Bangui, while on an assignment focused on investigating the activities of Wagner Group in the country. By the end of the year, Russia’s involvement had made its way into a UN Experts Report.
In the midst of a protracted armed conflict that had been ongoing since 2013, it emerged that President Faustin-Archange Touadéra sought out Russian assistance on the side-lines of a UN General Assembly meeting in 2017 to help bring about peace and get armed groups around the negotiating table. Russia responded by providing the national army with training and equipment and provided the president with security advice and personal protection.
To date, this has included: the free delivery of thousands of smalls arms to equip local law enforcement and two local battalions totalling 1,300 men; the deployment of Valery Zakharov (a former member of Russian intelligence services) as the top security advisor to Touadéra; the deployment of over 170 servicemen to train local security services; the deployment of an additional 30 servicemen to join the local UN peacekeeping mission; and plans to open a local office in the country.
Rich in natural resources – such as gold, diamonds and uranium – Russia is suspected to be shoring up support with Touadéra to secure these contracts. Indeed, reports have emerged of the presence of Wagner Group mercenaries guarding valuable gold and diamond mining operations in the country. This includes the large Ndassima gold mine that is alleged to have been taken over by Russian interests funnelled through a locally registered company known as Lobaye Invest. Ndassima was previously owned by a Canadian company before falling into the hands of Seleka rebels.
In addition to winning contracts in the extractives sector, the leaked documents further reveal that Russia plans to “replace national assembly representatives and [the] foreign minister who are orientated towards France” and “own [a] radio station and two print publications”. These objectives were partially achieved with the establishment of a new government this year and the opening of Radio Lengo Songo, which is funded by Lobaye Invest and the Russian embassy, last year.
France’s response to Russian meddling in its former colony has been vociferous. Following the free delivery of arms to the CAR the French Defence Minister noted, “I am not sure that this presence and the actions deployed by Moscow… help to stabilize the country”. In November 2018, in a show of force, France announced that it would be delivering its own arms to the CAR as well as aid to the value of USD 27.4 million.
South Africa – Rank Four
Ranked as a level four, recent Russian interests in South Africa have revolved around entering into political consultations with the ruling African National Congress (ANC) party ahead of the May 2019 general elections, monitoring of public-political social processes, and creating a new media – according to the leaked documents. This plan was formed as part of Putin’s strategy to support incumbents in office and to work against “pro-Western” parties and movements.
Just prior to the elections in May, in which doubt began to emerge as to whether the ANC would garner above 50 percent of the vote, a local investigation by the Daily Maverick revealed that these plans were underway. It emerged that entities linked to Prigozhin had devised to “create a disinformation campaign that favoured the ANC and put out a propaganda action against the opposition DA [Democratic Alliance] and EFF [Economic Freedom Fighters].” As a part of this strategy, Russia reportedly deployed a small team of political analysts to South Africa to work within a research outfit that would influence public rhetoric, degenerate and disseminate video content, coordinate with a “loyal pool of journalists” and produce “pro-ANC videos”.
While subsequent reports revealed that the initiative was not very effective and that there was no disinformation campaign, the attempt nevertheless points to the intent my Russia to meddle in African politics to ensure a favourable outcome.
Moreover, the investigation by the Daily Maverick further pointed to various business interests in South Africa that Russia planned to pursue under the leadership of Prigozhin. These include the supply of ammunitions and short-barrelled weapons to a South African company, the acquisition of stakes in a local industrial packaging company and various infrastructure projects, particularly in Johannesburg.
Beyond South Africa, the report revealed interests in Zimbabwe (a rank four country), particularly under the new president, Emmerson Mnangagwa. Here, Russia is looking to secure access to gold mining, tantalite, copper and chromium deposits – it is already developing one of the world’s largest deposits of platinum group metals – and the establishment of a military industrial complex.
South Sudan – Rank Three
Russia’s relationship with South Sudan cannot be explored without acknowledging the close ties it enjoys with its neighbour, Sudan (a rank five country). Putin had long enjoyed a close relationship with former Sudanese President Omar Al Bashir who reportedly even offered Russia a naval base at the Red Sea in return for support for his government, particularly in light of mounting protests. While Al Bashir was eventually removed in 2019, Putin still enjoys relations with the transitional military council in power and will likely play an active role in the 2020 elections.
South Sudan is crucial to Sudan, and therefore Russia. While Sudan lost 75 percent of its proven oil reserves after South Sudan gained independence in 2011, it nevertheless retains the infrastructure required to bring South Sudan’s oil to market and, as such, continued flow between the two states is necessary. As South Sudan has looked to open up its hydrocarbons sector to potential investors in light of its peace deal in 2018, Russia has emerged as a top contender.
In late 2018, a delegation from South Sudan along with officials from the government-owned Nile Petroleum Company travelled to Russia to a sign an MoU with a Russian oil company, Zarubezhneft, to explore some of its blocks open for licensing. The officials also signed two other MoUs with Russian oil producer, Gazprom Neft and energy company, Rosneft, to develop a geological map of the country’s minerals. In addition to these oil exploration deals, Russia is also reportedly working to establish a refinery for South Sudanese oil back in Sudan.
Furthermore, it is alleged that as Russia’s commercial relationship with South Sudan continues to expand, Russia may soon shift to promoting its military interests in the country. In this scenario, much like in the CAR, its security forces are expected to be deployed to guard Russian interests – such as oil blocks – and train local forces.
Democratic Republic of Congo – Rank Two
Russia has recently hedged its bets by backing newly-elected President Félix Tshisekedi following the controversial general elections that took place at the end of 2018. While many Western countries – including France and Belgium – supported opposition concerns that Tshisekedi had struck a deal with former President Joseph Kabila ahead of the vote, Russia not only sided with the new president but – along with China and South Africa – also blocked the UN from taking any meaningful action regarding the vote.
This action is unsurprising given that Russia had engaged in discussions with Kabila and his supporters about reviving a 1999 agreement on military cooperation in 2018, and had reportedly cultivated a relationship with Tshisekedi ahead of the vote. Rich in natural resources, Russia is likely looking to gain access to new concessions whilst promoting an anti-Western ideology in the country – a stance previously undertaken by Kabila and likely to be pursued under Tshisekedi.
While Russian engagement with Africa has certainly grown, with trade and investment climbing by 185 percent between 2005 and 2015, it lags behind the initiatives of other major powers, such the US, the EU, and China. Each one of these countries has established economic and military ties across the continent and has their own programmes in this regard.
While US investment in Africa has barely risen since 2010, in June 2019, it launched a new Prosper Africa policy to reverse this trend and, indeed, counter both Chinese and Russian influence across the continent. The US also has a vast military presence in Africa, which includes 34 sites with high concentrations in the north, west and the Horn of Africa.
The EU and Africa also have extensive ties. Economically, 41 African states have signed Economic Partnership Agreements with the bloc and there is even talk of a continent-to-continent free trade agreement. Military, France has a large presence across the continent, particularly in the Sahel and the Maghreb. As part of Operation Barkhane alone, France has deployed over 3,000 personnel to the region in its largest overseas operation.
Lastly, China remains the top contender (economically speaking) with it being the continent’s leading trading partner. The total volume of two-way trade between China in Africa currently exceeds USD 200 billion while investment from China to Africa doubled between 2010 and 2016. As a show of further commitment to the continent, in September 2018, President Xi Jinping pledged an additional USD 60 billion in broad and diverse financing. Its key focus in this regard has been its Belt and Road Initiative.
In comparison to these other actors, Russian influence in Africa appears relatively weak and poses a limited threat to more established players. However, instead of competing head to head in terms of military or economic might, Russia is likely playing a more subtle game in which it establishes itself in less popular destinations, sows seeds of discontent with the West, helps up prop up long-term leaders and secures access to natural resources.
SEE COUNTRY OUTLOOK: SOUTH-AFRICA, CENTRAL AFRICAN REPUBLIC, SOUTH-SUDAN, SUDAN, MADAGASCAR, CHAD, ZAMBIA, GUINEA, UGANDA, EQUATORIAL-GUINEA, DEMOCRATIC REPUBLIC OF CONGO, ETHIOPIA, EGYPT, MALI, LIBYA, ZIMBABWE
In his upcoming State of the Nation parliamentary speech, President Ramaphosa will need to seize the initiative by committing to ambitious structural reform of failing state-owned enterprises and to recapture the debate on economic policy. If he wavers in his policy address, rival political leaders within his own party will see an opportunity to continue populist rhetoric on the mandate of the central bank and other emotive issues like land expropriation.
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
- EXX Africa director Robert Besseling moderated a panel on Africa’s commodity rollercoaster at GTR Commodities in Geneva hosted by Global Trade Review (GTR)
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- TUNISIA: MAIN POLITICAL PARTIES SEEK TO MITIGATE IMPACT OF UPSET ELECTORAL DEFEAT
- ZAMBIA: CHINA SEEKS MINING ASSETS AS COLLATERAL TO PROTECT AGAINST LOOMING DEFAULT
- SPECIAL REPORT: SHOCK TO GLOBAL OIL PRICES WILL IMPACT AFRICAN PRODUCERS AND IMPORTERS