Africa Country Risk
Expert risk-analysis of the economic, political and operational risk environment for over 50 African markets to direct your company’s regional and global growth strategy.
Africa countries covered:
Central African Rep.
Congo, Dem. Rep.
Our African Country Risk Service covers 50 of the region’s most significant markets, from regional economic leaders such as South Africa to frontier markets like Rwanda and Namibia. We identify key trends and themes for the countries and sub-regions likely to impact your operations over the next 12 months and beyond.
All of this combines to give you the specialist information and analysis you need to:
- Make expertly-informed investment decisions
- Expand your operations in developed, emerging and frontier markets
- Enhance your global growth strategy
Our Products and Services:
Business Monitor Online Service:
- Our BMO Country Risk Service provides you with country research, macroeconomic forecasts, political and business environment risk analysis and operational stability on a country, regional or global basis.
- The service gives you access to daily news analysis, country assessments and 5- and 10-year forecasts to keep you constantly updated on the latest developments that could affect your operations.
We produce 24 quarterly updated country reports identifying risks and opportunities in a market over a 5 and 10yr period. Key areas of focus include::
- Economic Activity
- Monetary Policy
- Fiscal Policy
- Balance of Payments
- Debt Dynamics
- FX Rate
- Political Risk
- Business Environment Risk
- Market Assessment: Forecast your company’s growth and profitability for 2013 and beyond
- Market Development: Benchmark long-term growth assumptions for Africa
- Business Planning: Fine tune your business strategy for Africa using our forecasts
- Risk Mitigation: Measure economic, political and business environment risks facing your company
- Hedge: Manage currency volatility and input price risks
- Business Opportunities: Target opportunities in key industries
- International Exposure: Evaluate your company’s exposure in your export markets
Key features of the Country Risk Service:
- Our unbiased 5 and 10yr economic forecasts for key macroeconomic variables are essential for your medium and long-term investment decision-making.
- Our Risk-Ratings system rates each country for economic risk and provides a powerful country comparative investment tool.
- Economic activity
- Balance of Payments
- Monetary Policy
- Exchange Rate Policy
- Fiscal Policy
- Foreign Direct Investment
- External Debt
- Global Assumptions
- We examine structural risks to a country’s political system and outline scenarios for how the country could evolve over the medium- to long-term to guide your future activities.
- Our Political Risk Ratings analyse and quantify short and long-term risks to political stability, examining states in comparison to their regional and global peer group. compared with regional and global averages, which could affect your strategy.
- Business Environment Risk Ratings quantify and compare a country’s operating risks against its regional or global peers
- Domestic Environment
- Foreign Direct Investment
- Foreign Trade
Our African Track Record
View: In our Q4 2012 Sovereign Risk Ratings update, we highlighted Tunisia as a likely candidate to see its long-term foreign currency credit rating downgraded before the end of the year. From our standpoint, the country’s economic outlook was significantly weaker, and its political transition considerably more volatile, than many of the official ratings agencies were forecasting.
Result: On December 12 Fitch Ratings cut Tunisia’s long-term foreign currency rating to ‘BB+’ from ‘BBB-‘, stating “the country's economic and political transition is proving longer and more difficult than anticipated and downside risks around the process have therefore increased”.
Quote: As we have mentioned on previous occasions, we believe our proprietary ratings can help assess future moves by the official 'Big 3' sovereign credit ratings agencies. In particular, we highlight Morocco and Tunisia as the most likely candidates that could be downgraded over the coming months, which would push their credit ratings into non-investment grade, or 'junk' territory.
View: In July 2012 we predicted that the Kenyan economy would rebound in the second half of the year thanks to lower inflation and interest rates, which would boost consumption and investment.
Result: Real GDP growth picked up, rising to 4.6% year-on-year in Q312, from 3.3% in Q212 and 3.4% in Q112.
Quote: “Macroeconomic conditions continue to improve and this should see economic activity picking up over the course of the year and into 2013… Central Bank of Kenya will begin to ease monetary policy in the second half of the year providing a boost to domestic firms and consumers.” (‘Growth: Long-Term Optimism Despite 2012 Downgrade’, July 3 2012)
View: In April 2012 we turned outright bullish on Kenyan equities, predicting that stocks would rally given the cheap valuations, promising long-term macroeconomic fundamentals and falling local debt yields.
Result: The Nairobi Stock Exchange-20 equity index rose by over 16% between April and December 2012.
Quote: “Cheap valuations, a positive long-term macroeconomic picture and the fact that government debt yields are on the decline all bode well for gains in the equity market.” (‘Turning Bullish Kenyan Stocks’, April 20 2012)
View: In March 2012 we initiated a bullish view on Nigerian equities, highlighting bank stocks as particularly promising given various structural reforms, improving investor sentiment and attractive valuations.
Result: Nigerian bank stocks rallied by over 53% between March and December 2012, as measured by our customised Nigerian banking index which is composed of 14 key banks and bank holding companies.
Quote: “The banking sector, which comprises a large portion of the overall (equity) index, is expected to perform well in 2012, as questions about the sector's viability have been largely resolved. Looking ahead, investors will likely be substantially more confident about the sector's future”. (‘Equities Heading Higher Over The Long Term’, March 20 2012)
View: In January 2012, we took a bullish stance on Côte d'Ivoire's US$2032 eurobond, arguing that forthcoming negotiations with international creditors and an economic recovery following post-election conflict would boost investor demand for the instrument.
Result: The US$2032 eurobond rallied sharply, with yields declining by over 240 basis points between January and May 2012.
Quote: "We think it is possible that a significant amount of arrears accumulated since the December 2010 default will be repaid. Our forecast of a robust recovery in Côte d'Ivoire from the post-election violence in early 2011 also informs our bullish view." ('Bullish View On Eurobond Playing Out', January 16 2012)
View: In January 2012, we outlined our bearish view on the Ghanaian cedi, highlighting the multiple downside pressures on the currency. We argued that a combination of negative macroeconomic fundamentals and weak local sentiment would drive the cedi lower over the months to come.
Result: The cedi subsequently depreciated by over 12% against the US dollar between January and June 2012.
Quote: "In our view, the currency weakness is being driven by multiple factors: high import demand, US dollar strength, foreign investor risk aversion, a lack of local confidence in the cedi and high seasonal demand for foreign exchange...we expect the cedi to stay relatively weak over the short term." ('Bearish Cedi View Playing Out', January 11 2012)
View: In December 2011 we warned that the South African economy would likely suffer a slowdown in 2012 due to global headwinds and potentially high investor risk aversion. Moreover, our forecast for real GDP growth (2.7%) was significantly below Bloomberg consensus (3.4%).
Result: Growth was sluggish throughout 2012 and Bloomberg consensus moved successively lower throughout the year. Severe industrial unrest in the mining sector in the second half of the year meant that even our bearish forecast proved too optimistic.
Quote: “Given the poor outlook for growth in the US and eurozone, as well as the potential for a hard landing in China, South Africa is likely to suffer from the weak global growth environment and potentially high investor risk aversion… our 2.7% projection is below Bloomberg consensus (3.4%).”(‘Growth Slowdown On The Cards’, December 9 2011)
View: Since the onset of Egypt’s 2011 political revolution, we had been arguing that a devaluation for the Egyptian pound was on the cards. Rapid capital outflows and a burgeoning current account deficit meant that the country was experiencing a classic balance of payments crisis. We believed the central bank’s efforts at defending the currency would be in vain, and that only by allowing the currency to depreciate against the dollar would a degree of competitiveness be restored.
Result: In late December 2012, the central bank announced that FX reserves were at a critical level, before subsequently introducing a new exchange rate regime. As of early January, the currency had hit an all-time low near EGP6.5626/US$.
Quote: We hold to our long-held view that the Egyptian pound will be devalued at some point in 2012. Although determining the precise timing of such a move is inherently difficult, the majority of macroeconomic and financial market indicators are pointing to a marked weakening in the currency over the coming months.
View: Following Libya’s civil war, we highlighted our view that a sharp curtailment in oil production and stalled infrastructure projects would see a massive contraction in real GDP growth in 2011. Despite data limitations, our forecasting methodology – which combines macro level data with micro indicators from our Oil and Gas and Infrastructure Research teams – proved extremely valuable. We estimated that real GDP contracted 61.7% in 2011.
Result: In October 2012, Libya’s central bank released data showing that North African economy contracted 61.2% in 2011.
Quote: Libya's robust macroeconomic recovery is expected to continue apace through the latter stages of 2012, with a faster-than-expected resumption of oil production supporting a V-shaped recovery in the oil economy. Household and government spending should also rebound over the coming months, primarily given the pent-up demand as a result of the collapse in consumption patterns witnessed in 2011. We forecast real GDP growth of 86.4% in 2012, following upon an estimated contraction of 61.7% in 2011.
View: In December 2011, we highlighted the attractiveness of Uganda local debt, particularly at the short end of the yield curve. We believed that both foreign and domestic investors could make good returns given the very high nominal yields, as well as the likelihood that inflation was peaking and the Bank of Uganda had reached the end of its hiking cycle. Furthermore, we viewed the Ugandan shilling as being strongly supported. We consequently entered a bullish position on Ugandan 91-day T-bills in our global key market views on December 29 2011.
Result: Our key market view yielded a total return of 10.2% within the two months that we held it.
Quote: "The prospect of falling inflation, the end of an aggressive monetary tightening cycle and a stable currency have led us to initiate a bullish view on 91-day Ugandan government treasury bills"('Bullish Local Debt', December 29 2011)
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