Harare - Political risk factors are looming large for businesses focused on key southern African markets, with analysts now anticipating leadership changes in South Africa, Zimbabwe, Angola and the Democratic Republic of Congo (DRC) in the next few years.
The factors are expected to outweigh “internal” dynamics although lower commodity prices and waning global growth are also issues that investors will watch out for.
“For businesses to succeed in this diverse region, it is important to take a threat-led approach and understand the unique and evolving risks that could impact the business in that specific market,” said George Nicholls, a senior partner for Control Risks in Southern Africa.
Control Risks released its risk map for next year titled Southern Africa: Management of Political Change Will Dictate the Level of Uncertainty for Businesses, which also said “African businesses will remain vulnerable from failing to accord cyber security risk the same value as security or political” threats.
The group said the threats would weigh on business and investors, with South Africa, the region’s most industrialised economy, set to have elections in 2019.
“In South Africa, President (Jacob) Zuma will face his greatest challenge yet at the ANC conference in December and (it is anticipated his deputy) Cyril Ramaphosa is to replace him as head of the party,” said the Control Risks report.
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The country, with the world’s largest platinum and chromium reserves, is a major hub for investors seeking exposure into the region.
Nicholls said macro-economic and domestic political changes were driving African nations to reinvent themselves into becoming commercial hubs.
He said although this presented lucrative new opportunities for business, it also “engenders unknown risks and requires a deeper understanding of the local political and regulatory environment” and appropriate responses and planning.
One of the southern African markets that has proven tough for investors from a regulatory and political perspective is Zimbabwe, where President Robert Mugabe’s Zanu-PF party is torn apart by internal fights to succeed the ageing leader.
Mugabe’s deputy, Emmerson Mnangagwa, has emerged as a front runner but he faces opposition from a grouping of younger politicians known as the G40.
There have been moves in previous months to sideline Mnangagwa but he has remained in the race although an annual conference of Zanu-PF this week is unlikely to come up with a definitive successor for Mugabe.
“Change is expected at the top of Zanu-PF in Zimbabwe, with Emmerson Mnangagwa most likely to succeed Robert Mugabe as president during the course of 2017 (ahead of elections in 2018),” Control Risks said.
Investors were betting their chances on Mugabe speedily naming a successor, with some companies such as Impala Platinum already looking to the longer-term outlook for growth in Zimbabwe.
The DRC was more likely to see an immediate change in leadership, while the issue “of succession will be felt acutely” as the end of President Joseph Kabila’s second term in December “will usher in a period of uncertainty” going forward.
“A highly contested transition, with no clear timeline for future elections, will carry high risks of violence and is generally likely to prove detrimental to the business environment,” the risk advisory firm said.