Jeff Pearce & Sarah Cunningham-Scharf
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Promises and perils in 13 African countries | Canadian Insurance

Promises and perils in 13 African countries

Africa matters. This notion shouldn’t need to be expressed for a land mass so large and so rich in commodities, let alone wildlife species and flora.

And yet Africa is too often dismissed because of the persistent image of a continent in chaos, shaken time and again by dictatorship, famine and disease. Westerners often assume that if Rwanda’s genocide was all about Hutus versus Tutsis then surely all other conflicts in Africa must be ethnic or “tribal” in nature.

Only they’re not. Red blood spilled can often be explained in other colors: gold and green, plus black and brown— black is for oil and brown is for cocoa. The Democratic Republic of Congo’s misery was over coltan, a mineral substance that can be found in practically every computer, cell phone and TV set on the planet.

But that’s the past, and today’s reality is far more complex… and encouraging.

Bad news first: it’s true that many nations are still coping with corrupt and brutal legacies. Burundi’s constitutional court has just approved President Pierre Nkurunziza’s bid for a third term, even though the constitution says a president can only be elected for two—and it was made while the court’s vice-president fled the country for Rwanda, citing death threats. UN agencies had to ask nicely for the militias in the Central African Republic to stop recruiting child soldiers and to release about 10,000 they’ve been using as cooks and messengers and for sexual purposes. And Sierra Leone is still feeling the aftermath of its civil war, which ended in 2002.

As if that weren’t enough woes for the continent, there are the ongoing health concerns of malaria, Ebola and HIV/ AIDS. The World Bank has estimated the Ebola virus could cause $33 billion in damage to affected countries.

Ready for some good news? Africa has 17 multi-party elections expected this year, with democratic conditions actually improving. As New African reported last month, “gone are the days when in some African countries, voters were offered… a ballot paper that carried just ruling-party candidates, or even worse, one candidate pitted against a symbol.”

In our age, of course, money talks as often and as well in Africa as it does everywhere else. Rather than stage a sham ballot, incumbents are more likely today to divert funds from government programs to bankroll their election efforts. But as New African pointed out, money certainly yells at the top of its lungs in U.S. elections. Of course, there can still be surprises. Nigeria saw its ruling party ousted last month in a historic upset.

And despite the world’s economic downturn, petroleum and gas exploration continues in key nations. Oil deposits were discovered off the coast of Ghana in 2007, and Norwegian energy company Statoil has so far found eight reservoirs of natural gas so far off the coast of Tanzania since 2012. Because of these discoveries, China—with its insatiable appetite for commodities —has become a major international investor throughout Africa. It’s purchasing mines, building infrastructure, and creating jobs for Africans in different countries.

China has even sent troops to fight in the South Sudanese civil war. The infant nation run from Juba is rich in oil, and Beijing wants to protect its investment — and its presence isn’t always welcome. As the world’s largest copper consumer, China’s invested more than $2.5 billion in mines and resource extraction in Zambia. But in the past few years, there have been violent conflicts between Chinese managers and Zambian workers at the mines, as well as strikes demanding higher wages.

Strikes are commonplace for many African mines, which are equally infamous for unhealthy and dangerous working conditions (tuberculosis is a particular scourge for southern African operations). In 2014, there was a fivemonth platinum miners’ strike in South Africa that caused the country’s GDP to shrink by 0.6 percent. The declining price of gold forced mines in Ghana to lay off some of the workforce in 2013, which also resulted in a walkout.

Besides union troubles, many African nations wrestle with high levels of debt. Yet despite corruption, disease, and security risks posed by Islamist militant groups like Boko Haram and al-Shabaab, the wider African economy is expected to grow at 5.2 percent in 2015, posing a strong global economic opportunity.

Facebook thinks Africa is important enough to give the continent its own division; after all, there are 100 million users there, “friending” and “liking” away. And 80 percent of them are not clicking on Facebook through laptops or tower units but by cellphone.

For our risk map of Africa, we had to be selective, and so we focused, in part, on countries that should be of key interest to foreign investors and companies because of their market potential and commodities. But we also want to highlight some nations that are poorly understood in the West or deserve a second look.

Africa matters, and these nations, each with unique cultures, problems and opportunities, should definitely be on your geopolitical risk radar.


After many years of being Africa’s largest economy, South Africa was overtaken last year by Nigeria, and the difference between the two countries’ GDPs isn’t small. Nigeria’s GDP was estimated at $510 billion in 2014 while South Africa’s was far in the distance at $370 billion.

This isn’t really surprising, since the nation of the late, beloved Mandela has suffered years of union struggles, increased crime rates and allegations of corruption against Jacob Zuma’s government. The 2012 Mangaung Resolution, a policy seeking to solve corruption issues, actually gives ministers increased power to intervene in certain market sectors, while Zuma isn’t making any efforts to appease concerned international companies.

Income distribution is worse than at the end of apartheid, and the country sees an average of about 43 murders per day. As we go to press, there has been a wave of xenophobic attacks on foreign-owned shops in Johannesburg and violence against migrants and refugees from Zimbabwe, Malawi and other countries. The victims are often called kwerekwere, a pejorative term for foreign African nationals, and even the army has been called in to curtail the violence.

South Africa used to lead the continent in mining, but a 2014 Fraser Institute report knocked the country back to 11th in Africa and 64th worldwide.


BMW, Cisco, General Electric, South32 – BHP Billiton


When you think of chocolate, think of the Ivory Coast—its proper name being Côte d’Ivoire. Cocoa and coffee sealed this small country’s fate long ago, and 35 percent of the world’s cocoa supply comes from there. Prime Minister Daniel Kablan Duncan wants to see that number increase to 60 percent by 2020. Other sectors, like oil, gold and mineral mining, are seeing growth.

It’s a piece of West Africa divided by religion (the north more Muslim, the south predominantly Christian) and old scores from a decade-long civil war. In 2010, Laurent Gbago lost the presidential election to Alassane Ouattara, but wasn’t willing to concede power. Gbago commanded the military to resist Ouattara; the stand-off lasted four months and cost more than 3,000 lives. Gbago is due to face prosecution soon at the International Criminal Court at The Hague; his wife was recently sentenced to 20 years in prison for her involvement in the violence.

The government has voluntarily taken on a lot of debt in the past year; it recently issued a $1 billion Eurobond and plans on signing an $800 million loan from China to try to improve its electrical grid and transformers.


Nestle, Texaco, Unilever, Colgate-Palmolive, Taurus Gold, Foraco


When the price of gold declined, the former Gold Coast took it on the chin. Ghanaian-based mining companies were forced to cut back production and costs, while numerous layoffs led to strikes in 2013. But it turns out Ghana has more than one commodity that glitters.

Though it suffers from a large debt, the discovery of offshore oil reserves in 2007 has been a driver of foreign investment. The country began pumping crude out of its Jubilee field in 2010, which averages 100,000 barrels per day. Another project called TEN (Tweneboa, Enyenra and Ntomme) is expected to start in late 2016 and is forecast to produce 80,000 barrels per day. The oil sector is loosely regulated, and could become exploited if policies aren’t implemented.

Ghana’s oil is worth $3 billion and overtook cocoa in 2012 as the country’s second-most profitable export. Meanwhile, the government’s talking with the International Monetary Fund to find a solution for its debt issues. Perhaps most intriguing, Ghana is currently riding a tech and Internet wave, with sites like Dropifi and the investment efforts of William Senyo, entrepreneur and CEO of the microinvestment web platform, SliceBiz.


Kinross Gold (Canada), Nestle, Shell, Unilever, Tullow Oil


Boko Haram has been casting such a shadow over Nigeria that it’s almost eclipsed all other news about “Africa’s giant.” On March 28, in an amazing upset, Nigerians went to the polls and kicked out President Goodluck Jonathan. Former military leader Muhammudu Buhari won 52.4 percent of the vote, but the process was marred by the deaths of 41 citizens, including two electoral workers in the northeast part of the country—a Boko Haram stronghold. Many other Nigerians were thwarted from casting a ballot as armed combatants drove around scaring voters.

Oil’s steep drop has had a negative effect on the one-booming economy, as 15 percent of the GDP is generated through oil exports, but makes up nearly 80 percent of government revenues. Nigeria has drawn on nearly 80 percent of federal reserves to fill the budget void, while the International Monetary Fund estimates 2015 growth will only be around 4.8 percent.

Despite negativity, investors believe there could be upside potential for the Nigerian economy if sectors other than oil are better exploited, such as the country’s three billion untapped tons of iron ore.


General Electric, China National Offshore Oil Corporation


Sierra Leone used to be infamous for the blood diamonds that fueled its long civil war. Now it’s still trying to contain Ebola; more than 10,000 people have died, and there have been lockdowns to slow the spread of the virus as recently as late March. The disease also prevented nearly 180,000 people from working as of December 2014; business revenues have decreased by as much as 40 percent.

Another setback to growth has been the price of iron ore, which has plunged from more than $100 per tonne to $57 per tonne. It’s responsible for 16 percent of the country’s already small GDP (the GDP per capita was $809 in 2013). Major mining companies have been dropping in value, but Sierra Rutile has started a $77 million expansion of its Gangama Dry Mine project.


African Minerals (London), London Mining.


Zambia is one of the more stable countries on the map, and its relative peacefulness is a mild miracle. Kenneth Kaunda ran the nation for three decades but caved to protests in the 1990s, giving up power and bringing back multi-party democracy. Zambia is all about copper, with its exports accounting for about 70 percent of the country’s GDP, though the government has increased support for agriculture.

But Zambia’s relationship with mining companies is still contentious. Last October, the government implemented a policy to increase its royalties from open pit copper mines from 6 percent to 20 percent, and from 6 percent to 8 percent for underground mines. Meanwhile, it’s withheld $600 million in tax refunds from mining companies to prevent tax evasion. Some mining companies have fought back by halting production.

China, the world’s largest consumer of copper, has invested about $2.5 billion in natural resource extraction and in manufacturing, another prominent sector. But there have been violent clashes between mine operators and workers; in 2010 Chinese managers shot and wounded 13 miners at the Collum Coal Mine, the second largest in the country. Violent protests erupted again in 2012 over demands for a wage hike.


China Nonferrous Metal Mining Group, Barrick Gold (Canada), First Quantum Mineral (Canada), Glencore (London)


Tunisia will always be remembered as the birthplace of the Arab Spring in 2011, as Tunisians pushed out autocratic leader Zine al-Abidine Ben Ali. When the Islamist Ennahda party took over, there was big talk of tolerance… which didn’t last long, as the new regime cracked down on the media and tried to bring in a constitution that would have removed many rights for women. By the time the next elections came around last year, Ennahda was out and Nidaa Tounes was in—Nida Tounes being far more secular in its outlook. Tunisia disappeared from BBC and CNN news cycles for quite a while, and then in mid-March, militants killed 21 foreign tourists and a police officer at the Bardo Museum in Tunis. One sign of the temper of the country is how thousands rallied in protest on March 29 in the streets of Tunis to voice support for anti-terrorism.

It’s a country with ancient ruins that wants its valuable tourism dollars back. Unemployment has been an issue since the revolution; it hovered around 15 percent at the end of 2013, with youth unemployment especially severe at around 34 percent. The economy as a whole has seen a recent decline due to decreases in major sectors like agriculture and oil and gas.


PT Medco Energi


Tanzania is the place Westerners visit when they want to go on safari but can’t do Kenya. But there’s so much more to the country, including the fact that large natural gas reserves discovered recently offshore (Statoil has found eight since 2012) are having a positive impact.

That’s certainly helped to make Tanzania the second-largest economy in east Africa, right behind Kenya. Politically, Tanzania is more stable than other countries, but it’s a mixed bag when it comes to economic news. Its agriculture accounts for a quarter of the country’s GDP, but employs around 75 percent of the workforce. Financial services, IT and trade are growing as sectors, but not offering many jobs. In 2012, it was discovered that 28 percent of Tanzanians live below the poverty line.

Infrastructure is still an issue, though efforts are being made to improve the country’s roads, and the World Bank says economic growth is currently expanding at about 7 percent.


Statoil (Norway), ExxonMobil (U.S.), Barrick Gold Plc (Canada)


Egypt’s long post-Mubarek fallout continues, with ousted president Mohammed Morsi sentenced to 20 years in late April for having protesters arrested and tortured during his brief regime. That same week, an Egyptian court handed down death sentences to 22 Muslim Brotherhood supporters for attacking a police station in Cairo. But while the feud between the Brotherhood and other political factions continues, no one has been held accountable for the deaths of more than 1,000 protesters before Mubarek was kicked out.

As the political pot simmers, there is some good economic news. A deal was signed recently between Egypt, Sudan and Ethiopia to settle their collective dispute over the Nile’s waters and the development of Africa’s biggest hydroelectric dam in Ethiopia. Cairo had argued the dam might give Ethiopia greater access to the famous river but would only increase Egypt’s water shortage problems. For now, that headache seems to have gone away.

But the country’s growing population, combined with a reduction in arable land, is posing a threat to the economy. Egypt relies heavily on its agriculture sector, which is concentrated along the Nile and accounts for about 14 percent of its GDP.


PepsiCo Inc., Xerox Egypt, Apache Corporation


These are two countries now, but still so connected we’ll look at them together. Politics first. If you believe the International Criminal Court, the man running Sudan, President Omar al-Bashir, is a war criminal, guilty of genocide. The African Union, however, has called the ICC racist and pointed out that the court seems to go after mainly African suspects. It’s very difficult, however, for the African Union to dismiss the fact that Khartoum, relying on Arab militias—the infamous Janjaweed—has systematically slaughtered different ethnic peoples in Darfur. Western media followed the war and genocide in Darfur, but have made far less of a big deal over the systemic mass murder of the Nuba people in central Sudan.

The real root of the fighting comes down to oil and where it is. Canada— for those who default to assuming we always occupy the moral high ground— was among the Western nations that had oil companies in Sudan and which hired Janjaweed to drive innocents from lucrative land parcels in the 1980s and 1990s. After a seemingly interminable civil war, South Sudan broke away in 2011—taking with it about three quarters of the region’s oil production since most reserves were along the border. Sudan’s now drilling new wells to make up for the losses. Despite all the photos of dunes and camels, a good portion of the country has cultivatable land, plus cotton and gold.

Meanwhile, South Sudan has had its own civil war erupt in December 2013 between the government and rebels after a power struggle. Border flare-ups continue with Khartoum, and there are also ongoing tensions with neighbouring Chad.


Sudan – Talisman Energy (Canada), State Oil Company Canada, CNPC; South Sudan – China National Petroleum Corporation, Petronas (Malaysia), Oil and Natural Gas Corporation (India)


Botswana is the nation of diamonds without conflict, the world’s biggest producer of them. But while the shiny rocks have made it a middle-income country, the glitter can’t go on forever— the supply’s expected to be depleted between 2025 and 2030. Meanwhile, other sectors of the economy have gone woefully undeveloped. Botswana gets its reasonable share of Africa’s tourism trade, but the famous Kalahari Desert isn’t good for much agriculturally besides tending cattle, and there’s an infamous dispute going on between its famous nomadic bushmen and the big mining operations that want their land.

All this while Botswana has a high unemployment rate, hovering around 20 percent, plus the highest HIV prevalence rate in the world, and 18.4 percent of its population living below the poverty line. The miracle is that with such damning percentages, Botswana remains the continent’s most stable and longest-running multiparty democracy. Of course, it’s a small democracy, with only about two million people. Still, the Democratic Party last year won its tenth election in a row since the country gained independence in 1966.


DeBeers, Firestone Diamonds (UK), Hodges Resources (Australia)


For decades after its independence, Kenya was considered the “safe” country to invest in and where to go on safari. But in recent years, it’s picked up a rather unsavory reputation for corruption. Ethnic violence marred the disputed election of 2007, with more than 1,000 deaths and hundreds of thousands driven from their homes. The 2013 election saw no violence, but there were still accusations that the process was rigged.

Add to this picture the mildly surreal factor that Kenya—beautiful, formerly calm Kenya—has had to deal with the ongoing threat of al-Shabaab terrorists since 2011. The group has carried out many attacks on Kenyan soil, affecting the country’s lucrative tourism industry, which accounts for 12 percent of GDP. The militant group was responsible for the Westgate Mall attack in 2013; its deadliest and most recent attack murdered 48 people at Garissa University on April 2. In retaliation, on April 6, Kenya’s military bombed and destroyed two al-Shabaab bases in Somalia.

In 2014, Kenya was classified as a middle-income country after the rebasing of its economy. Agriculture is responsible for 25.4 percent of the GDP, and manufacturing accounts for 11.3 percent. Economic growth for 2015 is estimated at 6.9 percent after suffering challenges like droughts and terrorist attacks by al-Shabaab.


Nestle, Cadbury, British American Tobacco, Google

Copyright 2015 Rogers Publishing Ltd. This article first appeared in the May 2015 edition of Corporate Risk Canada magazine