“Who’s next?” is one of the hottest games to play?
Will the revolution head to the rich Arabic countries? What about Pakistan or Iran? What about Belarus?
In a long note published last week, Citi’s David Cowan looks down the continent to see who else in Africa might be at risk.
For now, there are elections on the horizon, but nothing too worrisome:
All this is occurring against a background of further elections to be held in Africa in 2011 in many of the countries in which investors have become involved. The immediate focus will quickly become Nigeria in April, but the process will move on to Zambia later this year, probably in October or November. Elections will also be held at some point in 2H 2011 in Egypt, which against the background
of sharply raised political expectations, could end in further unrest.
So far, markets are unmoved.
But does this outbreak of political conflict mean that going forward investors will be more pre-occupied with the potential negative impact of political risk when making investment decisions? The answer at this stage seems somewhat mixed. On a purely practical level, the reality is that spreads on most African Eurobonds, which did immediately widen on the back of events in Egypt, have quickly returned to their former levels as investors seem to have concluded that there is little reason to expect a similar political crisis to hit these countries.
Moreover, as James Bond, the head of the World Bank’s Multilateral Investment Guarantee Agency, noted at a conference in South Africa in mid- February, while risk insurance premiums have risen in North Africa, they have not generally risen in the rest of Africa. This seems to reflect the broad view of
bankers and business leaders that the current turmoil is somehow a series of unrelated events and will be contained.
But obviously countries have deep economies problems. This chart is fairly eye-popping:
So should Nigeria — the 16th biggest oil producer in the world — where the vast majority of the population lives on less than $2/day be worried? Well, there are rebel attacks on pipelines all the time, but ironically, its the country’s poverty that really separates it from some of its more volatile North African counterparts:
If North African events are going to provide a guide as to how political unrest develops in SSA, events over the last month indicate that it was unemployed graduates and the middle classes – both of which felt excluded from the recent pick-up in growth and resented the lack of wider political freedoms – rather than the poor majority that led the demonstrations against the incumbent regimes.