Africa improves on commodity price increases and capital access


Jeremy Weltman
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Sub-Sahara bounces back in ECR in step with LatAm, while debt, political instability and global protectionism constrain rises elsewhere.


Analysts’ perceptions of Africa improved during the first half of 2018, results from Euromoney’s Country Risk Survey show. This was mainly due to recovering commodity prices, which in turn lifted economic indicators, as well as improving capital access.

Even though the continent is one of the riskiest regions in the world due to geopolitics and trade wars, it has bounced back this year; in fact, Africa and Latin America are the only two regions that have been on a rising trend since 2010.

Euromoney Country Risk collates the views of more than 400 economists and other experts, evaluating the risks faced by investors across a range of political, economic and structural criteria. Scores for these indicators are added to values for capital access and debt, and are aggregated each quarter to provide total risk scores and rankings for 186 countries.

In sub-Saharan Africa, average growth is projected to rise from 2.8% in 2017 to 3.4% this year, according to the IMF, accelerating in two thirds of countries.

Rising trend

Botswana, on a rising trend this decade, has been the region’s safest country since 2014, lying in 49th place in the global rankings. That puts it well ahead of South Africa (ranking 66th), where analysts upgraded a range of indicators following the election of Cyril Ramaphosa as head of the ruling ANC party in December. 

Among the positives, analysts highlighted Ramaphosa’s pragmatic style for healing divisions within the ANC, as well as his promotion of policies to address corruption and restore macro-fiscal stability after he replaced Jacob Zuma as South Africa’s president in February.

SSA risk trend graph-400

The news of more than $14 billion-worth of investments from China initially lent some support to the rand, although the currency has since been knocked by the wider turmoil in the emerging markets. 

However, concerns over the socioeconomic implications of rising unemployment, higher inflation, low growth and land redistribution are still holding South Africa back, and its score showed the biggest decline among the large economies.

At the other end of the scale, South Africa’s neighbour Zimbabwe remains one of the region’s highest-risk countries (169th in the global rankings), but its risk score has taken a positive turn since president Robert Mugabe was ousted in November.

Zimbabwe’s political, economic and structural risk factor scores are among the worst in the region, highlighting the formidable macro-fiscal and social challenges for the new president, Emmerson Mnangagwa. His administration must address cash shortages and a bloated civil service, and will need to engage multilateral creditors and investors. Securing grants, concessional borrowings or a bridging loan is nevertheless possible, analysts say, if Mnangagwa makes concessions and offers a conciliatory tone as the political fallout from the contested vote in July dies down.

“The outlook remains a positive one relative to the Mugabe days”, says Rafiq Raji, ECR survey contributor and chief economist at Macroafricaintel. “The government desires to keep the goodwill of the international community, and with scrutiny and the collective desire of key partners, there is little doubt that the new Zimbabwe that would likely emerge from all these troubles is one that would be better, more prosperous and certainly better governed”.

The survey confirms improving risk trends for other important African economies including Côte d’Ivoire (up 14 places this year to rank 84th) and Senegal (three places higher, now ranking 86th). Both countries are among the fastest-growing on the continent, maintaining real growth rates of around 7% this year and benefiting from a stable single currency within the West African Economic and Monetary Union (UEMOA).

Nigeria (the continent’s largest economy) and Ghana are among a total of 11 countries with an improved risk profile in the first half of 2018; and they are among the 27 that have improved since 2010.


Some of the higher-risk countries have also done better, including Angola and Ethiopia; the latter is another of the fastest-growing on the continent, climbing three places in the global risk rankings to 106th in the first half of the year. 

The average risk score for Africa has improved more than the Middle East, the G10 and the Bric group of large emerging markets, but the continent is still riskier overall, highlighting political and institutional weaknesses and rising sovereign debt burdens.

For example, Republic of Congo is one of the higher-risk borrowers, held back by security problems and a debt burden exceeding 100% of GDP.

So, too, is Democratic Republic of Congo, where ECR indicators for economic growth, government finances, government stability and the regulatory and policymaking environment have crashed because of political factors, and where new mining regulations have heightened operating risks. 

In Gabon, the government has accumulated a large fiscal deficit since 2015, exacerbated by the wage bill. Accumulated arrears, declining private investment, balance of payments deficits and dwindling foreign currency reserves highlight the economic risks that led analysts to lower their scores.

Analysts have also hesitated to upgrade Cameroon in the first half of 2018, given the political uncertainty ahead. Cameroon is due to hold a presidential election in October, against the backdrop of instability and conflict between independence-seeking groups and security forces in Anglophone regions: that has led to very low scores for all economic, political and structural risk indicators.