Exploring Sub-Saharan Africa’s emerging risk landscape
Sub-Saharan Africa (SSA) is on the cusp of regaining its foothold as a premier investment destination. However, the region’s path to recovery is fragile, and requires subtle manoeuvring.
It is imperative to understand the evolving risk landscape of SSA in order to manage risks and opportunities in a way that is both opportunistic and sustainable.
The end of the commodity super-cycle exposed SSA’s structural risks, with a lack of economic diversification leading to a sharp slowdown in real GDP growth. Currency risk has been exacerbated by rising debt levels, with the financial sectors across SSA facing mounting pressure. Additional structural risks include extreme weather conditions, interstate conflicts, a lack of infrastructure, and unemployment or underemployment.
Uncertainty in global financial markets does not traditionally bode well for Africa. There remains considerable uncertainty regarding the current United States administration’s fiscal path; and an uptick in geopolitical risk seeing investors retreat to safe-haven destinations. The probability of a debt crisis in China has risen as the country’s shadow banking system has grown, which could have devastating consequences for the SSA region.
What our experts say
The lines between mitigating risk and capitalising on investment opportunities have become increasingly difficult to discern, and those seeking to benefit from the SSA region must carefully weigh their strategic options.