It is no secret that Africa is ripe with opportunity. However, the continent’s political environment is changing dramatically. Investors will find that they need more than one business card in their Rolodexes if they want to make the most of those opportunities.
This change is good news for citizens and for governance standards. Stalwart African presidents such as Uganda’s Yoweri Museveni, Democratic Republic of Congo’s Joseph Kabila, and Angola’s Jose Eduardo dos Santos, today face unprecedented pressure from a wide variety of constituencies for transparency and accountability.
Social change is never without turbulence, however, and investors may find the going more difficult without the short-term stability a strongman can provide. For business, this signals the end to the era of making deals with little more than a well-placed phone call or handshake.
Examples of this new drive for accountable governance are plentiful. Nigeria’s recent elections provide the clearest instance of this new push for accountability. The electorate broke from a decades-long tradition of voting based on religion, ethnicity and regional biases and issued a crushing verdict for incumbent President Goodluck Jonathan.
Accountable governance is already having an impact. Africa is seeing far fewer civil wars and their devastating effects. Public services continue to improve – albeit from a low base – as politicians realise that if they want to get re-elected, they have no choice but to provide more for citizens.
Whereas power and influence were once monopolised by the few, the new culture of accountability allows for a range of additional power brokers by increasing the number of seats at the table. The added influence of opposition parties, lobbying groups, NGOs and the average citizen with a smartphone is leading to an unprecedented diffusion of power in many African countries. In the business world, this can have paralysing effects.
Anyone who has tried to get a project over the line in Kenya since the country’s new constitution came into force in 2010 has seen first hand the challenges that increased democratisation and accountability can create. Other countries are sure to present similar challenges.
Successful investments throughout sub-Saharan Africa now require managing not just a few key relationships, but also a host of second- and third-tier ones as well.
Another risk facing investors is the impact of accountable governance on contract stability and the regulatory environment overall. As leaders respond to popular demands to redress misdeeds of the past, a review of private sector licences and contracts will most likely follow.
Multinational mining companies are often the hardest hit by reforms. The DRC and Zambia recently sought to amend their codes to increase governmental royalties and percentage of in-state ownership. Meanwhile, anxiety among foreign investors is growing over Nigeria’s plans to overhaul its oil sector under President Buhari, who has gone so far as to take on the oil ministry portfolio himself to ensure that he meets public demands to root out the corruption that defined President Jonathan’s time in office.
Finally, investors should be particularly mindful of leaders who attempt to enact populist policies once they gain power. In Zambia, the late former president Michael Sata led his Patriotic Front (PF) party to victory in 2011 by appealing to poor, urban voters with diatribes against foreign mining interests and Chinese investors.
Sata was, then, compelled to turn the rhetoric into self-defeating policy once he was elected. Since taking power earlier in 2015, President Edgar Lungu has largely maintained his predecessor’s positions, as well as his popularity. However, he faces a budget deficit of almost eight per cent, the worst-performing currency in the world, and shutdowns at several of the country’s copper mines with resulting job losses.
Not all African countries have followed this trend toward increased accountability, of course. Eritrea remains a siloed autocracy. Zimbabwe continues to sink deeper into kleptocracy, its electorate too jaded to challenge the vested interests that, sometimes literally, prop up its nonagenarian leader, Robert Mugabe.
By and large, however, Africa’s new politics represents a shift from the post-colonial strongman style of governance to a more unpredictable environment. Unrealistic campaign promises, policy shifts, and sclerotic decision-making are part of this new normal.
On the plus side, such unpredictable conditions should be familiar to anyone accustomed to doing business in Europe or North America. Shifting politics are not just a challenge in sub-Saharan Africa’s developing democracies, but one for business to navigate globally.
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