What Will Really Make Africa Attractive Is The Contrast It Provides To The Rest Of The World- Barnaby Fletcher on Africa in 2020 RiskMap
December 11, 2019
By Ajong Mbapndah L
Control Risks , the leading global business risk consultancy, recently published the 2020 RiskMap which reveals key trends shaping the investment landscape in major African markets. The authoritative guide offers a comparative snapshot of market opportunities, investment risks ,and a broad longer-term outlook of key trends shaping the investment landscape in major African economies.
“In 2020 what will really make Africa attractive is the contrast it provides to the rest of the world. Efforts to lower trade barriers within Africa still have a long way to go, but the continent is moving in the right direction when much of the rest of the world – because of economic nationalism and trade wars is not,” says Barnaby Fletcher, Control Risks Associate Director and Africa Specialist.
Discussing the 2020 Risk Map with Pan African Visions, Fletcher says each country in Africa is different, with their own unique opportunities and challenges. The countries highlighted in RiskMap 2020 are a combination of those that show the most promise or the most improvement, he says.
The Risk Map also dwells extensively on the growing competition from foreign powers to get a foothold in Africa but Fletcher minimizes the potential for conflict as Africa now is a player in its own right, because of both the growing importance ,and confidence of individual countries, and the increasing strength of regional or continental organisations.
“Savvy African governments are increasingly able to play the various geopolitical competitors off against each other and, in doing so, access new financing and opportunities for their countries,” he says.
Thank you for accepting to discuss the 2020 Risk Map, can you start by sharing with us and our readers what the risk map is all about, and what bearing it has on Africa?
Barnaby Fletcher: RiskMap is an annual forecast of political and security risks that face Control Risks’ clients across the world. It is less a single report and more a collection of content that lays out how Control Risks sees the world, the key issues we believe our clients need to be aware of, and how these issues are likely to evolve over the course of the next year. What often attracts the most interest are our top five risks, which this year include: Geopolitics and the US campaign trail; The activist society passes judgement; Cyber warfare hits a new level; Economic anxiety meets political fragility; and Leaders without strategies
These top five risks are from a global perspective. All of them manifest across different regions in different ways, and part of the purpose of the country risk ratings and more in-depth articles also included in RiskMap is to explore their implications in specific countries. Looking at Africa in particular, RiskMap 2020 lays out our political, security and cyber risks for every country on the continent, as well as more in-depth views on how our global risks are playing out in Ethiopia, Angola, Sudan, Côte d’Ivoire, Egypt and Algeria.
What is the methodology used in making your reports and how accurate have previous risk maps been?
Barnaby Fletcher: Control Risks helps clients understand and mitigate risk. We do this in a variety of ways depending on the type of risk, using a range of different tools and methodologies. As a broad-based report covering a range of different issues, RiskMap 2020 does not have a single methodology behind it. Instead, we deliver each annual edition of RiskMap after months of discussion between our various country-focused analysts and experts in various fields. We also rely on data analysis – we have, for example, proprietary databases of kidnap and security incidents – but we also strongly believe there is no substitute for having country experts.
It is difficult to determine exactly how accurate previous editions of RiskMap have been, because we are not making precise predictions. We are identifying trends and risks of which investors should be aware, and in previous years we have been ahead of the curve in identifying trends that have subsequently grown in prominence and impact. If we look at specific countries it is easier to assess the accuracy of our forecasts and we have had some great successes, from predicting the downfall of Zimbabwean President Robert Mugabe to forecasting Cyril Ramaphosa’s replacement of Jacob Zuma as president in South Africa.
On the current report, what is in it for Africa, what are the fears and what are the hopes?
Barnaby Fletcher: Each country in Africa is different, with their own unique opportunities and challenges. The countries we highlighted in RiskMap 2020 are a combination of those that we feel show the most promise or the most improvement, and those that are interesting for a host of other – often less positive – reasons. For some countries 2020 represents a crossroads. In Côte d’Ivoire, for example, the 2020 general elections will be a key test of whether the country can maintain the political stability and economic growth it has rebuilt since the crisis that followed the 2011 elections.
In a statement on the report, you say African markets will become increasingly attractive in 2020, what is going to make them attractive?
Barnaby Fletcher:There are positive developments occurring all across Africa in different regions and in different countries. Perhaps most exciting are the ambitious reform agendas being pushed by relatively new leaders such as Prime Minister Abiy Ahmed in Ethiopia or President João Lourenço in Angola; two countries we provide more in-depth perspectives on in RiskMap 2020. There are also promising steps being made towards lowering barriers to intra-Africa trade. The African Continental Free Trade Area is an important symbolic step in this regard, but in terms of tangible benefits progress within regional blocs such as the East African Community is far more advanced.
However, in 2020 what will really make Africa attractive is the contrast it provides to the rest of the world. Efforts to lower trade barriers within Africa still have a long way to go, but the continent is moving in the right direction when much of the rest of the world – because of economic nationalism and trade wars – is not. As rising populism in the Americas, in Europe and in parts of Asia pushes leaders into short-term thinking new leaders in Africa have clear visions for their countries, even if the implementation of their strategies is uneven. The risk environment across much of Africa may be improving only slowly, but it is nonetheless improving as investors elsewhere face an increasingly volatile and unpredictable landscape.
Because of this attractiveness you say New players will even out Africa’s investment battlefield in 2020, who are these new actors?
Barnaby Fletcher:There is a stereotypical narrative around African geopolitics that portrays the continent as dominated by a US-China rivalry, in which the US pushes for governance reforms in exchange for financial assistance while China pursues commercial opportunities but steers clear of politics. This narrative has been outdated for a while and we expect this to become clear in 2020.
Over the past decade a host of new players have sought influence and opportunity in Africa. Russia, Turkey, the Gulf states and others have aggressively sought to establish a presence on the continent and have used a variety of different tactics to do so. The one similarity between these new players is that they want both political influence and commercial opportunities. In response, the traditional giants – the US, China and the EU – have adapted their own approaches. The US and other traditional Western donors are now more openly pursuing commercial opportunities for their own companies, while China is attempting to leverage its economic clout to push for political reforms.
You make mention of Africa’s tactical rivalries, can you shed some light on how these are expected to play out in 2020?
Barnaby Fletcher: The efforts of Russia, Turkey or other new players to establish a presence in Africa have been ongoing for at least a decade, even if they have intensified in recent years. In this regard 2020 will not suddenly mark some new phase or sudden shift in strategy. Nonetheless, further intensification of these efforts will lead to further intensification of the geopolitical rivalries we are already seeing. Russia marked its intentions with the Russia-Africa Summit in Sochi in October 2019; a post-Brexit UK wants quick trade deals to prove it can mark its place in the world; Saudi Arabia views the Horn of Africa as strategically important given the ongoing war in Yemen; and so on.
For investors a more complex and competitive geopolitical landscape around Africa presents both challenges and opportunities. Growing geopolitical interest means increasing flows of development finance, which is opening new sectors. But private-sector capital also risks getting crowded out or getting entangled in diplomatic tensions. As always, those investors that succeed will be those that take the time to understand an increasingly complex landscape.
While these countries have upgraded their African policies, you say most if not all of the policies prioritize short term wins over long term strategies, can you shed some light on this?
Barnaby Fletcher: All the geopolitical players looking to increase their presence and influence in Africa have adopted different approaches. China has built its presence through concessional loans and trade but is now pushing to strengthen its political influence. The EU and the US are looking to leverage their longstanding positions as development partners to access commercial opportunities. Russia is promoting engagement through security cooperation, while Turkey over the past decade has massively increased its diplomatic presence.
Some of these approaches are reflective of long-term strategies that have been implemented over the past decade. Other appear to be more short-term, ad hoc and sometimes opportunistic tactics. This is partly because geopolitical players are reacting to events; the fall of President Omar al-Bashir in Sudan, for example, prompted a rapid realignment of the geopolitical landscape in the country. But it is also because of a wider global trend of leaders without strategies. Leaders such as US President Donald Trump have made foreign policy decisions based on short-term domestic considerations and their approaches towards Africa have been no different.
There are some who consider the increasing interest of major world powers as another scramble for Africa, do you see in this the potential for conflict?
Barnaby Fletcher: There are clear tensions between different geopolitical players in Africa, which are reflective of both their competition within and outside of Africa. These tensions do occur in hotspots across the continent, Russia and France in the Central African Republic serving as an archetypal example of this. However, it seems unlikely that these tensions will lead to serious conflicts that will raise risks within Africa. This is not a Cold War situation in which Africa serves as a battleground for proxy conflicts between external powers. Africa now is a player in its own right, because of both the growing importance and confidence of individual countries and the increasing strength of regional or continental organisations. Savvy African governments are increasingly able to play the various geopolitical competitors off against each other and, in doing so, access new financing and opportunities for their countries.
In terms of specific countries and regions, any key predictions for 2020 on those that may do well and those that may be in trouble?
Barnaby Fletcher: The reform agendas of new leaders such as Prime Minister Abiy Ahmed in Ethiopia, President João Lourenço in Angola and President Cyril Ramaphosa in South Africa hold great promise. In 2020 these reforms are likely to start resulting in economic improvements, although there is also a risk; if the expected economic recovery does not transpire, the backlash could derail these leaders’ grand plans.
The East African Community also looks set to have a positive 2020. It is already the fastest-growing region in Africa and – in everything from its technological hubs to its innovative legislation around the energy sector – exemplifies a growing trend of African countries rejecting established paradigms in order to come up with solutions tailored to their specific needs. It will be interesting to see whether there is any more progress in 2020 towards the proposal that Congo (DRC) joins the regional bloc, which would bring challenges but also make it a major economic force.
We see so much about relations between Africa and the outside world, what consideration is given to intra African relations in making your assessments?
Barnaby Fletcher: One of the key issues we monitor is intra-Africa cooperation, especially when it comes to reducing trade barriers. The progress made towards ratifying the African Continental Free Trade Area in 2019 was hugely positive, but in reality its implementation will likely be slow; 2020 is not going to be the year it really starts to have a notable impact. Far greater steps have been taken within regional trade blocs such as the East African Community or the Economic Community of West African States.
At Control Risks we believe that this regional integration is essential to Africa’s future development. As a continent Africa cannot follow the same development path as Asia, in which developed economies outsource manufacturing operations that can be used as a stepping-stone towards middle-income status. In an age of growing automation and economic nationalism this is not realistic. Instead, Africa must attract and develop manufacturing that is intended to serve African markets. That task becomes much easier if the size of these markets – the number of countries that can be easily reached by a factory in Rwanda or Senegal or Uganda – continues to increase.
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