Report: Political Flux Threatens Stability of East Africa’s Business Environment

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According to RiskMap 2017, low oil prices and global economic sentiment will continue posing risks to businesses across East Africa into 2017 but internal political uncertainty across a number of key nations will pose a much greater risk.

RiskMap 2017 is an annual political and business risk forecast published by independent, global risk consultancy firm Control Risks which helps organizations manage political, integrity and security risks in complex and hostile environments.

“Macro-economic and domestic political changes are driving African nations to reinvent themselves in the hope of becoming Dubai or Singapore style commercial hubs,” notes Daniel Heal, Senior Partner for Control Risks East Africa. “This will present lucrative new opportunities for business, but equally engender unknown risks that require a deeper understanding of the local political and regulatory environment.”

In Kenya, the Jubilee Coalition turned party is likely to secure a second term in office but it is likely the months ahead of the polls will be marked by instability and localized violence in contentious areas due to opposition pressure.

The Ethiopian People’s Revolutionary Democratic Front is expected to retain power in Ethiopia with fractures within the coalition becoming more visible and complicating attempts at more comprehensive reforms to diffuse tensions and woo back investors.

Tanzanian President Magufuli is expected to continue his austerity and reform program with a nationalistic stance, increasing fiscal and regulatory risks to businesses.

RiskMaps 2017 predicts that the growing insecurity and economic hardship trends in Uganda and Sudan might pose challenges to the region’s two longest standing leaders, potentially leading to a surprise power change at the top.

Sporadic acts of terrorism are expected to continue in Somalia.

Based on the different strategies they use to protect their value and seize opportunity, companies will be defined as Arks, Sharks or Whales.

Arks will be defensive. Focusing on core business and markets they will shed non-performing assets, reverse unsuccessful mergers, cut costs and delay expansion. Mining, oil and gas companies fall will fall under this classification as a result of the collapse in commodity prices.

Sharks will hunt look for opportunities in new activities and locations while Whales will use their deep pockets and cheap financing to monopolise markets and engineer mega-mergers.

Heal advices businesses to take a threat-led approach and understand the unique and evolving risks that could impact them in this diverse market.


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