JOHANNESBURG: Political turmoil sweeping through North Africa is likely to mean more investment scrutiny for countries across the continent, although many south of the Sahara are likely to pass the test comfortably.
With as many as 20 national votes likely in 2011 — the most in any calendar year since Africa started to shake off the colonial shackles half a century ago — political turbulence was always going to rank high on the agenda.
The increasingly bloody crisis since Ivory Coast’s November election set an ominous tone, but the unforeseen uprisings that have rocked authoritarian regimes in the north have cast the rest of the continent in a different light.
As Zambian President Rupiah Banda pointed out at the Reuters Africa Investment Summit in Johannesburg this week, many sub-Saharan states went through the wrenching transition from autocracy to pluralism a generation ago.
"Our opposition leaders are calling on people to go on to the streets and remove this government, forgetting that in 1991 the Zambian people removed the one party state. They moved toward multi-party democracy," said Banda, who faces an election before September.
"We have gone through that period long before."
Ivory Coast aside — and excepting the likes of Zimbabwe and the irregularities that are commonplace in many more functional African democracies — other ballots in the region have not gone too badly.
Election tests
In Uganda, the shilling hit a record low against the dollar amid fears of violence or worse after a February 18 presidential election, but it passed off largely without incident.
A big test looms in April for Nigeria, the continent’s most populous nation and a democratic stripling having only ended military rule a decade ago, but a relatively orderly set of January ruling party primaries point to calm rather than chaos.
"Suddenly the rest of Africa looks kind of good," said Clifford Sacks, the Africa head of emerging market investment bank Renaissance Capital.
"Sub-Saharan Africa is now becoming the least risky oil-producing geographic region in Africa, and Nigeria now, on a relative basis, becomes one of the most stable major oil producers in the continent."
Speed of egypt recovery key
However, this relative revaluation of sub-Saharan political risk looks unlikely to translate into an immediate shift in investment flows, especially if Egypt recovers its poise sooner rather than later.
"All of these events should be making investors understand that South Africa is an oasis of stability and may be a good investment destination — as with a number of other countries in the rest of Africa," said John Coulter, the Johannesburg-based head of Africa for US investment bank JP Morgan.
"Kenya went through a political crisis but their economy is still viable and businesses are still functioning," he said. "But the translation to investment dollars is incremental not dramatic. People don’t immediately just shift."
However, in the longer term if the energy and vigor of Egypt’s mobile phone revolutionaries wanes or meets military and official obduracy, a more permanent gulf in investor attitudes could open between the continent’s north and fast-growing south.
"The general sense was that North Africa was always slightly behind the curve in terms of political change," said John Green, head of global business development for Cape Town-based Investec Asset Management, which oversees $4 billion in Africa outside South Africa.
"If Egypt plays out negatively, you could have a segregation of ‘I want to think about sub-Saharan Africa and north Africa differently.’"
