Q2 2016 geopolitical forecasts for Sub-Saharan Africa

08 Apr 2016, 12:00 am
Stratfor
Q2 2016 geopolitical forecasts for Sub-Saharan Africa

Feature Highlight

South Africa's ANC faces electoral challenge; Nigeria to hold steady in spite of headwinds; Energy progress in East Africa.

ANC members at a rally

The ANC's Electoral Challenge in South Africa

South Africa is planning to hold municipal elections between May and August, which will help shape the future direction of the African National Congress (ANC) as it approaches its next general party congress in 2017. President Jacob Zuma and the ANC are coming under fire from middle-class South Africans, and the Democratic Alliance, South Africa's primary pro-business opposition party, could win in key urban centres, such as Pretoria and Port Elizabeth. The ANC also faces attacks from the Economic Freedom Fighters, an upstart far-left party that appeals to the poor black majority in rural and semi-urbanized areas.

The ANC fears that should it lose any of these municipalities, it will struggle to recover them. The next two quarters will make it possible to gauge the extent to which ANC control over South Africa has diminished. Though unlikely, the ANC could delay the election if it feels that the risk of losing too many municipal areas beyond Port Elizabeth, Pretoria and a few others is too high. Delay would spark widespread protests, some of which could turn violent.

Meanwhile, low commodities prices are exacerbating structural problems that contribute to South Africa's economic decline and the ANC's apparently waning popularity. The end of the second quarter also marks the beginning of South Africa's strike season, typically the source of disruptions to its supply chain and mining sector. Unlike in 2012 and 2014, this year's strike season will be subdued since most wage agreements in the more contentious sectors do not expire until next year. Disruptions on the scale of the 2014 platinum strike would be a surprise.

Finally, South Africa's drought will necessitate continued imports of agricultural goods. However, the arrival of winter later in the year, will free the government from other financial commitments, such as supplying energy for cooling. Despite the fall in commodities prices, South Africa still has a reasonably healthy level of reserves given that it has chosen to let the rand float. This gives South Africa room to spend to offset some of the cost of increased imports. Rising food costs, however, will exacerbate inflation, which has been climbing because of the weakening rand and rising domestic energy prices.

Nigeria Holds Steady

In the Niger Delta, amnesty programmes remain firmly in place after President Muhammadu Buhari extended them in February. Low-level violence in Warri district will continue but will not coalesce into a broader Niger Delta militant movement. We expect Buhari to continue to go after former militant leader Government "Tompolo" Ekpemupolo, who is the most influential of the holdouts to the amnesty deal. Tribal and ethnic leaders in the delta support the government's pursuit of Tompolo.

Economically, Nigeria has a difficult quarter ahead. The naira will continue to face deflationary pressures; its black market rate is now 320 to the dollar, compared with an official rate of 199 to the dollar. Though the Central Bank of Nigeria's current monetary strategy is untenable in the long run, Nigeria has several options for sustaining its budget in the short term, and it will begin finalizing several agreements for international financing (through a combination of loans and issuing debt). Buhari and Deputy Oil Minister Emmanuel Ibe Kachikwu will continue overhauling the vital petroleum sector. Throughout the quarter, Abuja will continue implementing its structural changes and unbundling of the vast Nigerian National Petroleum Corp., which was split into seven independent operational units in March.

In the northeast, violence emanating from Boko Haram will persist but generally not spread in the second quarter. The ability of the Islamist group, formally known as Wilayat al Sudan al Gharbi, to attack farther-flung targets such as Abuja or even Kano or Kaduna has been and remains degraded. The Nigerian armed forces are similarly limited, however, in their ability to counter Boko Haram in remote hideouts in northeastern Nigeria.

West Africa Feels the Pain of Low Oil Prices

In general, West African petroleum producers – including Ghana, Gabon, the Republic of Congo, Cameroon, Equatorial Guinea and, of course, Africa's second-largest oil producer, Angola – will continue to experience financial stresses due to low oil prices. Angola will maintain its austerity budget, which it has already cut by 20 percent for 2016. We do not expect austerity to spark large protests – the ruling Popular Movement for the Liberation of Angola will see to that.

The Popular Movement for the Liberation of Angola will spend the next few months preparing for its party congress in the third quarter. President Jose Eduardo dos Santos has announced that in 2018 he will leave politics. Whether he will try to retain the party's top position during the congress is unclear, but either way, jockeying among the party's most powerful members to become his successor will continue. This will inevitably lead some factions and individuals to be marginalized, such as Vice President Manuel Vicente, the former CEO of state-owned oil company Sonangol, who has become entangled in a Portuguese corruption scandal.

Terrorist attacks stemming from al Qaeda in the Islamic Maghreb and affiliated groups will continue to be a risk in West Africa. Although countries such as Senegal, Ivory Coast and Niger are at risk, the most likely targets for attacks remain Algeria, Mali and Burkina Faso. Al Qaeda in the Islamic Maghreb affiliates in the Sahara and Sahel still lack the capability to attack hardened targets, which means their most successful attacks will continue to be against soft targets, similar to the attack in March at Grand-Bassam, the popular Ivory Coast beach resort. Unlike the terrorist attacks in southern Mali and other parts of West Africa, attacks in northern Mali will more resemble insurgency, such as hit-and-run attacks against the military.

Energy Progress in East Africa

In East Africa, Tanzania, Uganda and Mozambique will continue making progress in numerous energy projects. Financial interest disclosures on projects are not expected this quarter, though they may emerge on projects in Mozambique in the second half of the year.

In Mozambique, the rift between the opposition Renamo and the ruling Frelimo will persist, contributing to low-level violence in the middle belt of the country. Renamo is incapable of seriously threatening Frelimo, so President Filipe Nyusi and Frelimo have no need to accede to Renamo's demand that the opposition group be allowed to control provinces its presidential candidate won in 2014 elections.

The Congos Brace for Elections

Two trends related to elections have emerged in the Republic of Congo and the Democratic Republic of the Congo. In the Republic of Congo, President Denis Sassou Nguesso won re-election in March despite protests over his overturning of term limits in 2015. We expect low-level protests in the aftermath of the elections, but the lack of a significant opposition in the Republic of Congo means they will not become more than a minor nuisance to Brazzaville.

The Democratic Republic of Congo, meanwhile, will spend the quarter preparing for elections that will be held in the second half of the year. President Joseph Kabila still has not announced whether he intends to stand for re-election; even if he decided not to run, he would not announce it this quarter. Opposition groups will keep trying to build a coalition against him; Kabila will try to prevent them from doing so. As fragmented as the political opposition in the Congo is, a coalition would be difficult to form this far from the elections.

Negotiations in South Sudan, but No Solutions

Negotiations to close the rift between South Sudanese President Salva Kiir and rebel movement leader Riek Machar will continue. Although Kiir named Machar his vice president, the two are deeply divided over aspects of the August 2015 peace deal, such as the number of states South Sudan should have. A lasting solution will not happen this quarter, and steps toward any resolution will be small.


“Q2 2016 geopolitical forecasts for Sub-Saharan Africa” is republished with the permission of Stratfor and under content confederation between Financial Nigeria and Stratfor.


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