Africa: Political risk takes centre stage

Political developments across Africa have raised risk perceptions in several key economies. Allies of South Africa’s president made yet another attempt to force the resignation of Pravin Gordhan, the country’s respected finance minister. A broad coalition – including business leaders and members of the ruling ANC – has rallied behind Mr. Gordhan, but his position remains fragile. In Nigeria, President Muhammadu Buhari’s wife has alleged that her husband’s administration has been hijacked by a small cabal of corrupt officials and hinted that she may not support a re-election bid in 2019. Poor policymaking from the Buhari administration is continuing to hurt Nigeria’s economy; Emirates recently became the latest international airline to cancel services to Nigeria due to a persistent FX shortage. Elsewhere, the Ethiopian government’s violent crackdown on a growing protest movement has worried investors in the country, which has traditionally positioned itself as a politically-stable manufacturing hub. Finally, the Mozambican authorities have asked their creditors for a debt restructuring deal. The country’s debt load ballooned this year, partially as a result of off-budget spending by the government. Idiosyncratic political risks across the region should underline the importance of analysing African economies individually, rather than as a bloc.