How three upcoming African elections could affect your business
August will be a busy month for African politics, when voters cast their ballots in Rwanda, Kenya and Angola.
GTR looks at the political outlook for the three countries, and the key risks the elections present to businesses operating there.
Rwanda is considered one of the more stable countries in which to do business in Sub-Saharan Africa. President Paul Kagame, who has ruled the country since 2000, will be seeking his third term on August 4.
Kagame is hugely popular in the East African nation, credited with transforming Rwanda from a battleground to a prosperous, stable country. He won the 2010 election with 93% of the vote, and in December 2015, 98% of the population voted in favour of a referendum that allows him to run for the 2017 election and two more terms, which means he could stay in power until 2034.
Speaking to GTR, Robert Besseling, executive director of EXX Africa, a specialist intelligence company that forecasts African political and economic risk, says that with a weak political opposition in the country, nothing is indicating that the popular support for Kagame will change this time around.
“We’re looking at potentially over 90% turnout, and over 90% votes for the ruling party,” he says. “What’s more important is: what is going to happen after the election? How will the election be won, and will international partners approve? That will very much rule the international community’s determination to continue foreign aid and investment projects.”
Kagame is already under big pressure from the international community. Human rights organisations have accused him of restricting free speech, silencing dissidents and committing other human rights violations, while Western donors too are increasingly vocal about Rwanda’s repressive political climate.
“Major donors to the government – the US, UK and EU – have at several stages suspended or threatened to suspend their aid to Rwanda because of human rights violations, the crackdown on freedom of speech, etc. If distribution of international aid is slowed or suspended by big donors, that, of course, impacts the balance of payment situation for the Rwandan government,” Besseling says.
According to EXX Africa’s forecast, the severe restriction of opposition participation, as well as the side-lining of critics from within the regime’s ranks, will leave the government increasingly vulnerable to rising instability within the political establishment. It is likely that rival factions will grow in political influence over the next few years and form a serious challenge to the current political system.
“People have to be more aware than what is showing up at ﬁrst appearances,” Besseling says. “Most people have seen the economy grow at a record rate, and they know that the ruling party of Kagame is almost guaranteed to remain in power. But at the same time there are groups within the ruling party, the Rwandan Patriotic Front (RPF), and senior leaders in the military and intelligence agencies who also want a shot at the top leadership position.”
In the run-up to the 2017 election, he expects an even heavier local crackdown on dissent. However, the emergence of disruptive street protests or riots that would threaten government stability are unlikely to occur.
“People don’t want conﬂict; they still remember the 1994 genocide and the civil war afterwards,” Besseling says. “Most of it will play off behind the scenes. It will be triggered by the 2017 election and is going to play out in the years to come after that. And that is going to raise the risk of political instability, of coups, of military mutinies. It’s not a sustainable system and the cracks in it are already beginning to form.”
Kenyans will elect their president in a two-round voting system starting on August 8. While most polls have predicted a marginal lead for the incumbent President Uhuri Kenyatta, he and his mainly Kikuyu and Kalenjin Jubilee Party have faced an energised opposition coalition, the National Super Alliance (NASA) led by presidential candidate Raila Odinga, in recent months.
“The opposition has really made inroads into the ruling party’s lead,” Besseling says. “Mostly by focusing on the population’s social and economic grievances. The economy has been booming over the past five under Kenyatta, but many segments of the population have been left out of that boom.”
Preparations for the vote in Kenya have not been smooth, and tensions around the poll are heating up. Opposition leaders have accused the country’s Independent Electoral and Boundaries Commission (IEBC) of being inept and acting fraudulently to affect election outcome, which could weaken the credibility of the vote and increase risk of violence.
The shadow of Kenya’s past violent elections is still looming large. Due to the ethnic nature of the rival political parties, the risk of violence between rival ethnic groups in the 2017 elections is very prominent, Besseling says. Especially if the election goes to a second round.
“The expectations are sky high for the opposition. So if there were to be a vote that is close and disputed, which is likely, the probability of violence would certainly increase,” Besseling says, adding that Nairobi, the Rift Valley and the coast are particularly at high risk of unrest, which could lead to business disruptions. Yet, he notes that it is unlikely that 2017 will see the same level of violence as in 2007/08, when post-election clashes left 1,200 people dead.
The two outcome scenarios are very different in nature. Kenyatta, on the one hand, has been running on a pro-business platform, which means a second term with him in the lead is “generally risk positive for business operations” in the country, according to Besseling. Among other promises, Kenyatta’s party has pledged to boost investment in public infrastructure and technology, as well as establish an export-import bank and a national development bank to provide financing for small businesses.
The alternative scenario is that of an opposition victory, which would initially trigger a chaotic transition, Besseling explains.
“The first thing the opposition alliance would do if they were to get into power, would be removing all the ethnic Kikuyu and Kalenjins who control the key positions in government and state bureaucracy, from the highest to the lowest level. So there would be a huge amount of disruption, potential policy paralysis.”
Most importantly, he adds, the opposition has made corruption its main campaign theme. A new government would therefore prompt contract reviews, maybe even cancelations, of high-profile projects, particularly in the construction sector.
When asked which scenario is the most likely, Besseling says: “It’s too close to call, but the factor of incumbency is very strong.”
President José Eduardo dos Santos, who has ruled Angola for 37 years, will be retiring before the 2017 elections on August 23. The ruling People’s Movement for the Liberation of Angola (MPLA) has chosen defence minister Joao Lourenco as his party successor, and with Angola’s electoral system, in which the leader of the winning party becomes head of state, Lourenco is set to become the country’s next president.
The question surrounding this election is therefore not about who will win, but rather how the transition will happen and to what extend the dos Santos family will be able to retain influence, after Lourenco comes into power.
Over his four decades in power, the outgoing President dos Santos has amassed extensive wealth and power over many sectors in the Angolan economy. A loyalist to dos Santos, Lourenco is likely to remain beholden to the economic and business interests of the dos Santos family once he becomes president, according to EXX Africa’s forecast. His presidency is expected to be marked by continuity and moderate changes in policy, and it is unlikely that contract risks will immediately increase.
But, over time, the new president will consolidate his political authority: for example, Besseling expects to see him replace key dos Santos appointees with his own people. The first political battle, he says, is likely to take place over the future of Angola’s struggling oil company Sonangol.
“Lourenco seems to be far more willing to engage with the IMF and to open up the economy to foreign investors, who previously did not have a say in Angola, and other segments of Angolan society, rather than just the dos Santos family. And he seems more willing to push for reform in Sonangol. It’s not going to happen the day after the election, but he will slowly steer away from the dos Santos era.”
Besseling adds that this will marginally increase the risk of contract renegotiation or cancellation of contracts that were signed by the dos Santos family.
But Angola faces a range of other challenges: Lourenco will be inheriting an ailing economy, severely hit by the downward commodity spiral, and a looming banking crisis.
As a result of a deteriorating economic situation for the average Angolan, the 2017 election in Angola will come with a high risk of unrest. The National Union for the Total Independence of Angola (UNITA), the main opposition party, has been staging large protests and is considering boycotting the election.
“These are political protests, but they are really about social-economic grievances,” Besseling says. “If they were to hold those protests again, which they are planning to, they are likely to happen in all major urban centres, including the capital and Cabinda, the oil production capital. Usually the security forces are very heavy handed in cracking down on these protests.”
If the opposition were to go ahead with protests, it could cause serious disruption to commercial operations, cargo flow for aviation, traffic and internet services. The oil sector, however, is unlikely to be affected, as it is off-shore, Besseling ends.take me back