The Africa Risk Reward Index highlights the changing investment landscape in key African markets. It also aims to provide a long-term view of key trends shaping investment in these countries.
The 7th edition of the Africa Risk-Reward Index was released on September 20, 2022. This version: “When Uncertainty Turns into Opportunity” Control Risks’ work in collaboration with Oxford Economics Africa. It analyzes the medium and long-term future of the continent from three perspectives: the energy transition, the food crisis and the socio-political crises that threaten the stability of many countries.
Putting Africa back at the center of the global energy game
The Russo-Ukrainian war and European sanctions against Russia are repositioning Africa at the center of global energy issues. Indeed, major producers of fossil fuels (oil and gas) are subject to renewed interest from many countries of the Western bloc. Witness the visit of the French President Emmanuel MacronAugust 25 to 27 in Algeria, the leading African gas producer.
Additionally, the continent has been working for years to transition to renewable energies. Several countries on the continent, including Morocco, Kenya and Rwanda, have launched massive projects aimed at reducing their dependence on fossil fuels. One of the most beautiful examples of this is the Nour d’Overseas solar project in Morocco. However, the fear of “white elephants” still haunts these countries, where pharaonic projects or infrastructures have failed in the past: “Change [énergétique] to be done gradually in Africa; Many countries need to exploit and use their fossil fuels while actively developing renewable energies. Countries with large LNG potential, such as Angola, Mozambique, Tanzania and Nigeria, will attract steady investor interest, and it is important to follow discussions to a flaring conclusion.Patricia Rodriguez, Control Risks Senior Analyst suggests.
Food security is the emerging continent’s Achilles tendon
The report rightly recalls the continent’s strong dependence on the outside world, particularly in the agricultural sector. However, this strategic sector remains a major provider of jobs across the continent. Indeed, the continent’s prevailing agriculture reportedly suffers from two major deficiencies. On the one hand, there is subsistence agriculture, with little or no support from a strong industry. On the other hand, it suffers downstream from an almost non-existent supply chain. A well-known statistic African Development Bank Reveals that half of agricultural produce is lost before consumption or marketing due to poor transportation and storage conditions: «One of the most pressing issues is Africa’s dependence on importing even the most basic foodstuffs.”selon Jacques Nel, responsible d’Africa macro, Oxford Economics Africa.
Zlecaf aims to provide lasting solutions to these difficulties affecting the entire agricultural sector. However, the report recalls that several factors may limit the steps Zlecaf can take in this direction. On the one hand, the protectionism shown by many states of the continent and on the other hand, the ambiguity surrounding some of the business ethics in particular of Zlecaf regarding their actual use.
Socio-Political Crises: Perpetual Danger
Cost-of-living riots haunt many regimes across the continent. Indeed, the effects of the economic crisis associated with the Russian-Ukrainian conflict are affecting many African countries as well. In many countries such as Ghana, Nigeria, Uganda and South Africa, macro-economic figures such as inflation rate and unemployment rate have reached unsustainable heights. Added to this is political instability in several West African countries prone to coups. All of these factors are enough to fuel fears of a coup in many countries on the continent. However, the report is intended to be reassuring, as its authors believe that the risk of “regime change” in the countries mentioned remains low, even if the atmosphere in these countries is not peaceful. On the one hand, these regimes are still legitimate and on the other hand, the opposition parties are poorly organized and ineffective. However, he recognizes that companies may face several risks: “Going forward, businesses may be directly or indirectly affected by protests and must establish plans to manage risks such as indirect security threats, supply chain delays, theft and vandalism, or their employees’ duty of care.
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