Political and security risks present the greatest uncertainty for multinationals in SSA in 2023
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Sub-Saharan Africa faces several risks—as well as potential upside events—that could have significant impacts on multinationals in 2023. Political developments have the potential to substantially alter economic policy and private sector sentiment in the region’s largest economies of South Africa and Nigeria. Meanwhile, multinationals should prepare for potential developments in the Sub-Saharan Africa region’s numerous security challenges that could have both negative and positive implications for the operating environment and business opportunities over the course of the year.
- Pro-Zuma ANC president takes power in South Africa (25–30%): President Cyril Ramaphosa’s position becomes untenable following corruption scandals, worsening power shortages, and slumping ANC popularity in the polls. This culminates in his ouster well before the April 2024 general election. He is replaced with a pro-Zuma, hard-left candidate who abandons fiscal discipline and pledges to accelerate land expropriation without compensation. Investors are spooked, sovereign credit rating downgrades follow, and the rand depreciates dramatically.
- Naira free-float improves FX access (20–25%): In February 2023, a pro-business candidate—either the Labor Party’s Peter Obi, or the PDP’s Atiku Abubakar—wins the election and floats the naira within weeks of assuming office in May 2023. The multiple exchange rates converge (weakening the NAFEX rate and strengthening the parallel-market rate), and FX shortages are eliminated.
- South Africa’s electricity supplies improve dramatically (10%): Independent power producers steadily raise output, aided by fast-tracked licensing procedures. Eskom’s overhaul gathers pace, allowing its electricity output to stabilize and then gradually increase. Generous energy efficiency incentives and steep electricity tariff increases are implemented, causing power demand to soften. Electricity shortages are not eliminated, but load shedding (rolling blackouts) becomes increasingly uncommon and predictable.
- Severe insecurity affects Lagos and Abuja (15%): A terrorist attack takes place in the cities of Lagos or Abuja, killing dozens of residents. The high-profile nature of the attack leads to a drop in demand and market access in key commercial areas, and halts business and leisure travel to the country. The already-strained public sector reprioritizes its spending away from CAPEX and most goods, toward defense spending.
- Ghana defaults on its debts (20%): The government defaults on its eurobond repayments in Q2 2023, after failing to negotiate with an IMF bailout by Q1 2023. The default drives further credit downgrades, capital outflows, sharp currency weakening, and inflationary pressures. Public sector demand collapses suddenly, and private sector demand contracts.
- Full-scale Congo (DRC)-Rwanda war (30%): Tensions between Congo (DRC) and Rwanda boil over into a full-scale war in Q2 2023, with armed conflict concentrated in the DRC’s northeast region. In the region, public sector demand halts and routes to market collapse. Nationally, government spending stagnates, outside of defense spending.
- Ethiopia’s civil war definitively ends (20%): Several rounds of talks between the TPLF and Ethiopian federal government result in a definitive and lasting peace settlement. The process is aided by the withdrawal of Eritrean troops and the commitment by all signatories to constitutional reform that addresses the root causes of the conflict, namely the mechanisms by which federal funds for regions and provinces are allocated and administered. An end to the war prompts a series of economic reforms, including several birr devaluations, and the liberalization of state-dominated industries. FDI inflows surge, and donor engagement increases, resulting in booming economic growth.
- Economic reform in Angola boosts growth (15–20%): Rising economic growth—fueled by high oil revenues—temporarily buoys the governing MPLA’s popularity, allowing President Joao Lourenco to implement painful but pragmatic economic reforms. The government implements currency liberalization, privatizes the remaining state-owned enterprises, clamps down on corruption, and implements generous incentives to encourage the development of manufacturing and agriculture production.
- Mozambique’s Islamist insurgency spreads (10–15%): Insurgent activity intensifies in Cabo Delgado, causing energy companies to halt the development of LNG facilities. 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.
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