SSA Events to Watch

Improving economic growth contrasts with elevated downside risks in Sub-Saharan Africa in 2024

Despite improving economic growth and easing currency pressures in Sub-Saharan Africa in 2024, the region’s outlook remains vulnerable to downside events. While these risks are not a part of FrontierView’s base case, multinationals should be mindful of risks that could disrupt their commercial performance in the region. These downside events span political, security, and fiscal developments that could materialize with little notice. Here are the most important potential events to monitor in SSA (beyond those mentioned in our global report):

  • EFF forms a hard-left coalition with the ANC after South Africa’s election: The far-left Economic Freedom Fighters (EFF) party makes gains to become the second-largest party in parliament after the general election in May 2024. The governing ANC remains the largest party but secures less than 35% of votes, forcing it to form a coalition with the EFF. During coalition negotiations, the ANC agrees to adopt hard-left economic policies, including strict capital controls, increases in personal income taxes, nationalization of private sector industrial assets, and the expropriation of farmland. This triggers a sharp depreciation of the rand, a slump in international tourist arrivals, and accelerated emigration of highly skilled South Africans. The South African Reserve Bank raises interest rates sharply to stabilize the rand, but this causes borrowing costs to surge. FDI slumps, and the economy falls into a long recession beginning in H2 2024.
  • New civil war erupts in Ethiopia: Rising tensions between Amhara and the federal government trigger a renewed civil conflict, drawing in neighboring regions. This would be made more likely if the federal government fails to disarm ethnic militias operating in Amhara. The ensuing conflict is more destructive than the conflict in Tigray that ended in 2023 and ultimately disrupts commercial activity in Addis Ababa. The government struggles to maintain economic growth through infrastructure investment, instead diverting public funds to the armed forces.
  • Jihadists strike Lagos, Accra, and Abidjan: Repeated terrorist attacks within days occur in the cities of Lagos, Accra, or Abidjan, killing dozens. A drop in demand and market access in key commercial areas ensues. Governments introduce new security measures and temporary curfews that dampen commercial activity and stifle business and leisure travel. The already-strained public sector reprioritizes its spending away from CAPEX and procurement of goods and services, and toward defense spending.
  • Electricity grid collapses in South Africa: A surge in electricity demand during a cold snap in the winter months of June, July, or August 2024 coincides with breakdowns at coal fired power stations. The national grid collapses, resulting in a nationwide blackout lasting between seven and 14 days. Industrial activity, especially mining and manufacturing, contracts sharply. Telecommunications cease functioning within days as backup generators run out of fuel. Social unrest and looting occur in all major urban areas, as food and fuel supply chains collapse. The rand becomes much more volatile, reaching 25 per dollar within days of the grid collapsing. A sharp recession in H2 2024 is followed by a rise in unemployment in 2025.
  • DRC elections trigger unrest: The December 2023 elections are mired by accusations of vote rigging amid suspicions that the electoral commission is partial to President Félix Tshisekedi and his Union for Democracy and Social Progress party. This triggers widespread and protracted anti-government protests that last well into 2024 and eclipse the post-election violence witnessed in 2018. The ensuing political crisis emboldens M23 rebels in North Kivu, causing security to deteriorate in the far northeast of the country. Commercial activity in Kinshasa slumps for months.
  • Coup d’état in Cameroon or Zimbabwe: Aging Paul Biya (president of Cameroon) and Emmerson Mnangagwa (president of Zimbabwe) fail to make clear succession plans while continuing to tighten their authoritarian grips on power. Concerns over their state of health and ability to manage domestic economic crises (Zimbabwe) and security challenges (Cameroon) prompt their overthrow by their respective militaries. Commercial activity and consumer sentiment slumps, although the disruption is more pronounced in Cameroon given the unprecedented nature of the president’s ouster. In Zimbabwe, business sentiment recovers faster given the precedent of Mnangagwa himself having ascended to power through a coup.
  • Sweeping pro-business reforms in Nigeria: A sharp fall in food prices and a significant rise in FOREX reserves follow a surge in domestic oil production and stable global oil prices. This is aided by a deposit of several billion dollars made by the Saudi Arabian government into the Central Bank of Nigeria (CBN). The value of the naira against the dollar in the parallel market appreciates sharply. FOREX access improves markedly. This emboldens the CBN to introduce a free float of the naira, with the CBN confident that it has ample reserves to intervene to stabilize the naira if necessary. This boosts investor sentiment, prompting a surge in FDI into manufacturing and services. The government fully removes costly fuel subsidies without provoking social unrest. This boosts public finances, enabling it to restart infrastructure programs and raise social spending.
  • Kenya defaults on its debts: Widespread violent protests against the rising cost of living prompt the government to reverse the tax increases and budget cuts it had hitherto planned for 2024. Additionally, the shilling continues to lose value as the Central Bank of Kenya prematurely cuts interest rates. This raises the costs of servicing dollar-denominated debt, ultimately triggering a default. This drives further credit downgrades, capital outflows, sharper currency weakening, and inflationary pressures. Public sector demand collapses suddenly and private sector demand contracts.
  • Mozambique’s Islamist insurgency spreads: Insurgent activity intensifies in Cabo Delgado, causing energy companies to halt the production and export of LNG. Violence gradually spreads south, resulting in frequent attacks on the Nacala and Sena railway lines. Transport routes from coal mines near Tete are cut off, blocking coal exports. International trade via the port of Beira to Zambia, Zimbabwe, Malawi, and the DRC collapses, exerting pressure on ports in Maputo and Durban. Maputo remains largely unaffected, but Mozambique’s economic growth slumps.
  • Coup d’état in Nigeria: Escalating social unrest is triggered by soaring inflation, slumping commercial activity, and extreme FOREX shortages. Concurrently, a deteriorating security climate sees the spread of jihadist activity to the center and south of the country, a rise in kidnap-for-ransom activity, and a pickup in secessionist sentiment in the southeast. Emboldened by the 2023 coups in Gabon and Niger, the military’s faith in the government’s ability to cope with these crises erodes, prompting the ouster of President Bola Tinubu. Strict international travel curbs and domestic curfews are imposed. The naira depreciates, FOREX shortages worsen, and domestic consumer and business sentiment slump, taking months to recover.

Watch a video overview of the SSA Events to Watch for 2024

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