The main opposition’s rejection of election results is based on credible evidence of voter intimidation and ballot manipulation which EXXAfrica flagged three months ago. However, the results are unlikely to be overturned by the courts and a return to civil war or sustained widespread violence is unlikely. Violent demonstrations are however expected in urban hotspots in coming weeks and months.
EXXAfrica unpacks the data and trends behind the main insurance policies available to commercial entities in South Africa, debunking popular opinions around strikes and terrorism in particular.
In a three-part analysis briefing series, EXXAfrica explores specific threats to the aviation sector in Africa. In part one, we examine how the risks of war and terrorism may manifest via an explosive device attack, assault on an airport, or shoulder to air missile attack.
As security conditions across the Sahel continue to rapidly deteriorate, regional and international states have renewed their efforts to support joint counter-terrorism operations. EXX Africa assesses the potential for these efforts to address the current crisis, and the possible outcome for the security outlook across the broader region, including the resurgence of the narcotics trade.
Small-scale demonstrations in Egyptian cities are little more than a stinging condemnation of corruption within the country’s opaque military-industrial complex. Protesters are not calling for a removal of the military-backed regime, while slowing inflation and termination of IMF-mandated austerity measures should give the government more flexibility to loosen fiscal and monetary policy that will mitigate risk of unrest from next year.
While an alleged coup plot has been overblown by the government for political gain, the incident does put a spotlight on the deployment of politically affiliated militia groups ahead of next year’s elections. Businesses also face heightened risk of contract frustration, tax increases, and discrimination as the government seeks to raise funds for its political campaign.
On 23 September, Information Minister Kojo Oppong Nkrumah announced security forces had thwarted a coup against the government. Most Ghanaians reacted with scepticism to the suggested plot even though the government has seemingly overblown the importance of the incident for political reasons. While EXX Africa assesses that there is a low probability of an unconstitutional transfer of power in Ghana, there is a growing risk of political violence ahead of next year’s elections which has been thrown into the spotlight by this alleged incident.
As Ghana enters a new election cycle, businesses will be exposed to increased risk of commercial disruption due to unrest and rising crime rates, as well as higher political risks such contract frustration, corrupt practices, and changes to taxation. A Ghanaian election year also usually distracts the president and senior civil servants from public administration and economic management, thereby often raising the risk of payment delays to contractors. There is ample precedent for such perils based on previous election cycles.
The alleged coup plot
On 23 September, the Ministry of Information claimed that security forces had foiled a plot to overthrow the government and arrested three people believed to have been amassing makeshift bombs, weapons and computer equipment. The alleged plot was unravelled on 20 September after fifteen months of close surveillance of the activities of the coup plotters, according to the government.
The three alleged coup plotters arrested by security forces are Dr. Frederick Yao Mac-Palm, who owns the Citadel hospital in Accra and is a vocal political activist on social media; Ezor Kafui, a local weapons manufacturer; and Bright Allan Debrah Ofosu. On 25 September, the government made further arrests of some unnamed military officers in addition to the initial three main suspects. The ministry has also published a list of the weapons retrieved during the security operation, including 22 improvised explosive devices, six pistols, a long knife, three smoke grenades, seven mobile phones, and three laptops. The detained military officers are being questioned over their suspected role in procuring these weapons but did not play an active role in the coup plot.
Security experts in Ghana contacted by EXX Africa, including retired military officers, have dismissed the allegation of a coup as implausible given the profile and background of the suspects and the inferiority of weapons and ammunitions seized. The three main suspects have no military training or security-related background. Our sources say these individuals would not have had the capability and resources needed to overrun the first line of defence of Jubilee House (the official residence of the president).
The coup plotters are being defended in court by Victor Adawudu, a staunch member of the main opposition party, the National Democratic Congress (NDC). The NDC has publicly dismissed the claimed coup plot as a ploy by the government to clamp down on opposition supporters and the party’s financial backers ahead of next year’s elections.
We agree that the foiled coup plot has been overblow by the government as part of its broader electioneering strategy to re-elect President Nana Addo Dankwa Akufo-Addo next year. However, the incident does reflect growing concern over increasing risk of political violence around the elections.
Political violence outlook
Electioneering and political machinations are gathering pace in Ghana ahead of the country’s presidential and parliamentary elections in December 2020. Part of the broader strategy of the main opposition NDC party to win the election is to build a coalition against the governing New Patriotic Party (NPP). The NDC is seeking to maintain its momentum through the formation of the Coalition for National Sovereignty (CNS), which comprises nine political parties (including the NDC and the Convention People’s Party) and civil society organisations. The NDC has appointed former president John Mahama as its presidential candidate, which may be a tough sell given Mahama’s poor record of handling Ghana’s economy and his administration’s inability to fight corruption during its tenure.
The opposition CNS coalition is set to focus its campaign rising crime rates and more frequent violence in the country, as well as corruption in the energy sector, alleged abuse of state procurement, a looming banking sector crisis, and the NPP government’s unmet promises of ‘one-district, one-factory’ (building a factory in each district) and ‘one-constituency, one-ambulance’ (providing an ambulance for each constituency). However, the tone of the campaign is often belligerent and regularly ties into deep-seated local grievances in communities, raising the risk of violent unrest.
In January, a by-election in the Ayawaso West Wuogon constituency triggered violence that was orchestrated by both main political parties. The unrest left two people dead and 18 others hospitalised with gunshot wounds. The violence that marred the Ayawaso West Wuogon by-election portends concern over the outcome of the coming elections, where both parties have resolved to win, seemingly at any cost as they deploy youth militia groups.
In the unrest at the Ayawaso West Wuogon by-election, a state security operative publicly slapped NDC parliamentarian Samuel Nettey George. The report of the Commission of Inquiry set up by the government to investigate the Ayawaso West Wuogon electoral violence recommended the dismissal and prosecution of the security operative for assaulting the lawmaker. However, the government rejected the recommendation, which further reinforced the opposition’s perception of the politicisation of state security operatives. Nonetheless, the NPP government is genuinely worried that the NDC is training its militia groups to help win the elections, by applying intimidation tactics.
Our local sources are warning that both main parties are financing and training their affiliated vigilante-style militia groups to intimidate opponents in a bid to ensure electoral victory. This also relates to the background to the alleged coup plot. The arrest of Dr Mac-Palm and his co-conspirators, and the seizure of ammunitions and weapons was an attempt by the government to foil plans by the NDC party to train and arm its vigilante groups, including the notorious Hawks militia group. The opposition has meanwhile accused the government of using state security operatives to attack its supporters and leaders.
State assets for political campaigning
Another key concern in the elections lead-up relates to contract certainty as the government has begun a spree of contract cancellations and asset confiscations in order to fund its campaigning. Various local companies, banks, and their partners are at heightened risk of discrimination and confiscation over the coming year.
On 9 September, President Akufo-Addo inaugurated a nine-member board of the State Interest and Governance Authority (SIGA), which will replace the Divestiture Implementation Committee and the State Enterprises Commission. SIGA is poised to be one of the most important bodies in regulating all state-owned enterprises (SoEs), as well as joint-venture companies (JVCs) with state equity participation. The government holds equity interests in key sectors of the economy including banking, insurance and allied services, mining, engineering, energy, petroleum and gas, and agriculture. The government has identified the entities that fall under SIGA supervision. These entities included 40 SoEs, eight JVCs, eight mining companies, and five regulatory bodies.
The official purpose for the creation of SIGA is to improve the efficiency of SoEs by managing their level of borrowing, ensuring payment of dividends to the state promptly and promoting transparency and accountability. The government acknowledged that only four SoEs, five regulatory bodies, eight JVCs, and eight mining companies had ever submitted audited accounts. Moreover, only nine companies, comprising two SoEs and seven JVCs, paid dividends to the government in 2017, according to the government. In terms of financial loss, SoEs recorded losses of about GH¢1.3billion (USD 240 million) in 2016 and an USD 18 million revenue shortfall in the first half of 2019. These figures indicate the worrying level of institutional corruption at the heart of many SoEs, which have been used as a source of political patronage, as well as funding mechanisms for the governments to finance their political campaigns.
No sooner than SIGA was launched, the administration confiscated the Akwatia diamond mining concession and assets of the Great Consolidated Diamonds Ghana Limited (GCDGL) a subsidiary of Jospong Group of Companies (JGC). The GCDGL, previously state-owned, was taken over by JGC in August 2011. However, in April the government cancelled the agreement on the ground that JGC had failed to meet the terms of the contract. On 18 September, officials of SIGA supported by state security including the military shut down the mines and took over all its assets. The management of JGC is accusing the government of abuse of power.
Other JVCs and state firms privatised by the previous government are at risk of similar heavy-handedness by SIGA in its drive to raise money for the government. The opposition has accused the government of applying selective intervention tactics to target certain businesses for political gain. The opposition has also accused the government of favouritism in selecting banks to bail out during the cleaning-up exercise undertaken by the Bank of Ghana in August 2017. The revocation of the licences of UT and Capital banks that led to their takeover by Ghana Commercial Bank was claimed to be unfair. Other banks that lost their license were UniBank, Beige, Heritage, and GN Bank belonging to Papa Kwesi Nduom, the leader of the opposition Progressive People’s Party.
Whereas the National Investment Bank was also undercapitalised, the central bank allowed the state-owned bank to continue its operations. The four banks that received government bailouts through the Ghana Amalgamated Trust bond were Agricultural Development Bank, OminiBSIC, Universal Merchant Bank, and Prudential banks. All of these were tied to state interests and the NPP ruling party’s backers.
The opposition has also condemned the privatisation of the operations of the Electricity Company of Ghana (ECG) to a private company, the Power Distribution Services (PDS). PDS is expected to invest over USD 580 million in the country’s power sector within the next five years after receiving the assets and operations of ECG on 12 September. There are concerns that PDS does not have the capacity to make the expected investment in Ghana’s power sector. In the event that the opposition wins next year’s elections, the PDS contract would be at risk of being reviewed, if not cancelled.
Furthermore, the reduction of state equity participation in the Aker energy project from about 48 percent to 18 percent has been also condemned by NDC presidential candidate John Mahama, who claims that individuals associated with current Finance Minister Ken Ofori-Atta and his company Databank took part in the renegotiation of the Aker energy deal.
President Nana Akufo-Addo has presided over an economic recovery since coming to power in 2016 and Ghana will again be one of the fastest growing economies in Africa in 2019. He faces a possibly tough re-election contest against the main opposition party candidate, former president John Mahama, in December 2020. In the meantime, the government will seek to fulfil some of the bold and populist pledges it made in the 2026 electoral campaign, including the completion of hundreds of small-scale manufacturing projects across the country. To meet such pledges, the government will source new revenues through tax increases and contract reviews.
With election year fast approaching, businesses are likely to experience fresh tax hikes. In the 2019 Supplementary Budget, the telecoms sector will see an increase in the Communication Service Tax (CST) from 6 percent to 9 per cent effective from 1 October 2019. Telecoms firms have already announced plans to pass on the cost to their customers. The 2020 budget to be announced in November this year is also likely to see tax increase on tobacco and alcohol, as well as VAT.
Meanwhile, there is also heightened risk of corrupt practices affecting commercial interests ahead of the elections. The NPP government is facing mounting allegations of mispricing contracts, cronyism, and fraud, in an apparent continuation of the previous NDC government’s practices. According to some sources, Ghana’s government is losing some USD 2.8 billion per year in revenues due to overpriced contracts and commercial criminality.
In terms of the pre-election security outlook, fierce rivalry between the country’s two main political parties makes violent protests almost inevitable, especially in the lead-up to elections. Politically motivated unrest is likely over corruption allegations and poor socio-economic situations. Hotspots for protests and riots include over-crowded areas of Accra, such as Fadama, Nima, Maamobi, Ayawaso, the Agbogbloshie market and the violence-prone ‘Sodom & Gomorrah’ area close to the central business district.
There are further concerns over violence in areas where illegal mining is rife. During an election year, there is a tendency for a spike in the activity of illegal miners, locally known as galamsey. State security forces are often redeployed from providing security at mining areas to protecting political leaders in election campaigns across the country. The recent crackdown on galamsey including the arrest of 20 Chinese miners on 13 September was an indication that the government is seeking to appease public demand for actions against foreign galamsey.
Furthermore, the failure of the government to prosecute and jail Chinese illegal miners for fear of upsetting the Chinese government has led to civil groups questioning the government’s commitment to fight the scourge. Part of the government’s concern is not to jeopardise the prospect of securing USD 2 billion for the Sinohydro bauxite project.
SEE COUNTRY OUTLOOK: GHANA
A sprawling IMF-backed privatisation programme creates exceptional opportunities for investors across diverse sectors. State assets selloffs may also be the only course for Angola to reduce its massive public debt burden, to diversify away from the oil sector, and to slip out of an extended recession. Yet tenders and auctions will need careful management, transparency, and accountability to have their desired effect.
On 19 September, Angola’s privatisation programme’s technical group, the so-called ProPriv Programme, announced that 195 companies had been shortlisted for privatisation over the next three years. Most of the country’s state-owned or partially state-owned companies will be divested by next year, while larger state companies such as oil firm Sonangol will sell off key assets by 2022. Most companies and assets will be sold through public tender, with only 17 to be sold through the stock exchange.
The most well-known companies shortlisted for privatisation are state oil company Sonangol, diamond company Endiama, and airline TAAG, as well as banks BCI, BAI, BCGA, and Banco Económico, insurance firm ENSA Seguros, and the Angola Debt and Securities Exchange (Bodiva). Other state asset selloffs are planned in the textile, construction, brewing, agro-processing, and telecommunications sectors. Revenues from the sales are earmarked to bringing down the country’s high debt levels.
Angola’s government and the International Monetary Fund (IMF) are aiming to limit Angola’s government debt to gross domestic product (GDP) ratio to 90 percent. The IMF reported in June that Angola’s public debt stood at 91 percent of GDP in 2018. The country’s debt has increased significantly in recent years due to falling foreign currency oil revenues, which has led to a depreciation of the local kwanza currency and a rise in inflation. The privatisation programme is at the frontline of efforts to curb public debt to below 80 percent of economic output over the next two years.
However, two years into the presidency of João Manuel Gonçalves Lourenço and almost one year into the IMF’s three-year Extended Fund Facility, there remain significant challenges to recovering Angola’s economy, while foreign investors will remain cautious of committing to the privatisations. Nevertheless, the ProPriv Programme creates substantial opportunities for investors, particularly those in the banking sector.
Angola’s government aims to privatise a number of companies later this year, including ENSA-Seguros de Angola S.A., which is Angola’s largest insurance company. The state also seeks to sell its share in the breweries of Cuca, N’gola, and Nocal. Various smaller privatisations have also already been completed earlier in 2019, yet the largest divestments will commence from next year.
In 2020, the government aims to sell off its shares in another large group of state-controlled assets, including some major banks and construction company Mota Engil Angola, in which the Angolan government has a 20 percent stake. The banks prescribed for state divestment are Banco Angolano de Investimentos (BAI), Banco de Comércio e Indústria (BCI), and Caixa Angola.
The state will also sell its interests in mobile phone company Unitel and telecommunications operators Angola Cable, MSTelcom, TVCabo, and NetOne. Two cement companies are lined up for privatisation, namely Nova Cimangola and Secil Lobito, as well as three textile producers: Textang, Satec, and Africa Textile. Other companies shortlisted are bioenergy firm Biocom, agro-communal fund Aldeia Nova, and the Empresa Nacional de Exploração de Aeroportos e Navegação Aérea E.P. (ENANA), which operates Angola’s airports and controls civilian air traffic.
In 2021, the government intends to privatise the Angola Debt and Securities Exchange (Bodiva), downstream fuel distributor and marketer Sonangalp, telecoms firm Angola Telecom, airlines Sonair and TAAG Angola Airlines, and another bank – Banco Económico. TAAG, Angola Cable, Sonair and Banco Económico are some of the few companies that will be sold via the stock exchange, as will firms MSTelcom, ZEE, Multitel, Caixa Angola, and Aldeia Nova. This should give the newly privatised Bodiva a boost from 2021.
In 2022, ProPriv will proceed with the partial privatisation of some of Angola’s largest and most prominent state companies, including state oil company Sonangol, diamond mining firm Endiama, and postal service Correios de Angola. These companies have large assets both within Angola and internationally that may offer some of the most lucrative opportunities for both foreign and domestic investors. Sonangol is by far Angola’s largest company and one of the largest firms within Africa.
Sonangol asset selloffs
Sonangol has published an extensive list of foreign and Angolan commercial interests. The company is set to sell 50 subsidiary companies over the course of three years, as well as other assets. By the end of this year, the state oil giant is expected to dispose of 20 companies and assets. Within Angola, Sonangol also retains stakes in a broad variety of commercial sectors including healthcare, transportation, fuel refining, telecommunications, banking, construction, and mining.
Next year, the assets that are set to be sold off include the company’s subsidiaries in Cape Verde and São Tomé and Príncipe, as well as foreign interests in companies such as Founton (Gibraltar), Sonatide Marine (Cayman Islands), Solo Properties Knightsbridge (UK), Societé Ivoiriense de Raffinage (Cote d’Ivoire), Puma Energy Holdings (Singapore), WTA (France), and Sonandiets Services (Panama). Other foreign assets to be sold off include Portuguese real estate companies Puaça, Diraniproject III and Diraniproject V, in Sonacergy – Serviços e Construções, Sonafurt International Shipping and Atlantis Viagens e Turismo.
Sonangol chairman Sebastião Gaspar Martins retains the lead on the company’s asset selloffs, while working in close collaboration with Minister of State for Economic Coordination, Manuel Nunes Júnior, who oversees the ProPriv Programme. Both men are close confidantes of President Lourenço’s influential economic policy ‘czar’ Manuel Vicente, who is a former chairman of Sonangol and former deputy president. Much of the controversy surrounding the appointment of Gaspar Martins in May has centred on his role as CEO at Angolan junior oil firm Somoil, which was founded by Vicente almost 20 years ago and retains stakes in offshore oil blocks and interests in onshore production permits (See ANGOLA: SONANGOL RESHUFFLE PUTS ANTI-GRAFT CAMPAIGN INTO THE SPOTLIGHT).
Public tenders in the spotlight
Any sign that Sonangol chief Martins seeks to line up the elite to benefit from politically influenced tenders in privatisations would undo much of the economic benefits of the ongoing IMF programme. There are particular concerns that Somoil, which is affiliated to both Martins and Vicente, could improperly benefit from Sonangol asset sales. There is ample precedent that the loyalist network supporting President Lourenço is seeking to capitalise on their new positions of patronage.
In April, the government awarded the country’s fourth telecommunications license to little-known Telstar Telecomunicacoes, which beat 26 local and international firms. The deal triggered broad condemnation, since Telstar has no track record in mobile operations and being incorporated just over a year before the licence tender. The public fall-out earlier this year over the deal was mimicked on social media to such an extent that President Lourenço annulled the tender and ordered a new process. The IMF has also been critical of various other tender processes, including for the planned purchase of new aircraft earlier this year.
Such incidents have raised concern that the government is using President Lourenço’s liberalisation and transparency campaign not only to disarm political opponents, but also to ensure the support of its own favoured network of allies and supporters. Last year, EXX Africa released several analysis briefings and special reports, accurately forecasting such a scenario, raising particular flags over the influence of the new president’s family and the exceptional clout of Manuel Vicente (See SPECIAL REPORT: POLITICAL INFLUENCE AND PATRONAGE IN THE ‘NEW’ ANGOLA).
Manuel Vicente has a known background of opaque deals during his time as chairman of Sonangol and as deputy to then president dos Santos. His family and closest associates control an extensive network of business interests in Angola, Nigeria, Mozambique, and Europe. Many of these commercial interests have been tainted by allegations of corruption or mismanagement through various international probes. There is less publicly known precedent of impropriety on the part of Lourenço, who served as defence minister under dos Santos.
However, in EXX Africa’s publicly released report last year, we raised several questions over his purported role in the acquisition of military equipment during his time as defence minister through the same network of companies and individuals that has been implicated in Mozambique’s ‘hidden debt’ and corruption scandals. So far, the Angolan government has refused to respond to the report and questions remain over the due process over such procurements (See SPECIAL FEATURE: FALL-OUT OVER MOZAMBIQUE DEBT SCANDAL RISKS SPILL-OVER INTO ANGOLA).
The government has highlighted that transparency in tender processes will be a crucial tenet of the upcoming privatisations. The International Finance Corporation (IFC) of the World Bank, the country’s financial sector, business associations, and chambers of commerce are closely monitoring the government’s progress and the implementation of the ProPriv Programme. IMF approval for the release of another tranche of the USD 3.7 billion Extended Credit Facility will also hinge on transparency in the tender process. Angola has already received a total of USD 1.24 billion in less than a year from the Fund. The IMF programme has anchored Angola’s policy framework and shored up confidence in the country’s economy.
However, privatisations alone will not be sufficient to turn around Angola’s shrinking economy. Oil production is expected to continue to decline over the next year. The country has struggled to meet its quota agreed with the Organization of Petroleum Exporting Countries (OPEC) of 1.481 million barrels per day. As older wells deplete, and a lack of investment hampers the drilling of new wells, economic output is set to shrink by 2.6 percent this year and 3.6 percent in 2020. Moderate growth is only expected from 2021 once the economic restructuring and IMF-mandated reforms begin to benefit the broader the economy. Non-oil sectors will provide for the economic recovery, yet this is based on assumptions of improved transparency and accountability in coming years.
Meanwhile, painful reforms demanded by the IMF programme will begin to have their effect. We expect more strikes and protests, including from skilled workers in the cities and public sector employees who are exposed to any economic downturn due to public payroll cuts and high inflation which is expected to hover around 20 percent for the next three years. The IMF is mandating fiscal discipline that includes unpopular measures such as scrapping fuel subsidies and further devaluing the kwanza.
Loyalists of former president dos Santos are capitalising on mounting grievances over the economy and IMF austerity. The government is meanwhile seeking to scapegoat dos Santos loyalists for the economic malaise, claiming acts of economic sabotage lie at the heart of ongoing fuel shortages. This is starting to rip apart the usually unified MPLA ruling party that has ensured Angola’s political stability since the end of the civil war. Local well-placed sources tell us that the party could permanently split unless there is an improvement in the economy and the so-perceived ‘show trials’ of dos Santos family members and associates stop.
SEE COUNTRY OUTLOOK: ANGOLA
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 government will capitalise on Robert Mugabe’s legacy to consolidate its authority and establish further control over patronage networks in the banking and agricultural sectors. However, it is failing to make headway on an economic recovery, taming inflation, and restoring power supply. The opposition is set to resume protests and strikes in coming weeks, raising the risk of a complete economic shut-down. Foreign partners, even benevolent ones, will struggle to push through any form of debt relief and a mooted bailout as the crisis deepens.
The suspension of work on the Uganda to Tanzania crude pipeline is a major setback for the development of the Lake Albert oil sector and is likely to push back the deadline for commercial production even further. EXX Africa assesses the wider risk outlook for the Ugandan oil sector and the factors that could cause further delay to project completion.
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