The coming year is shaping up to witness a number of important national elections in sub-Saharan Africa.
And when leadership changes occur – especially in the abrupt manner that took place in Burkina Faso in November – fear is raised that foreign projects and contracts will come under review, be postponed, or even cancelled depending on the leanings and priorities the new government.
“Just from the risk perception, with a change of leadership, companies would be very worried about what that might mean because a lot of what companies do is cultivate contacts and understanding of the political leadership and their counterparts,” Jennifer Cooke, director of the Center for Strategic and International Studies’ Africa program, told AFKInsider.
“And when you’ve got a whole new team in there and you’re not clear what their vision and strategy is and who really pulls the strings, that’s an issue,” says Cooke.
Of course regime change growing pains can happen whenever there is a political transition and there are risks in investing and doing business in many regions of the world.
“I think it really depends on the nature of the leadership change,” Monde Muyangwa, Director of the Woodrow Wilson International Center’s Africa Program, told AFKInsider.
“I think the changes that come after an election, there’s less of that, unless there’s an abrupt break in terms of ideology and philosophy of the leadership and vision for the country. If you really look at it, what you see across many African countries is that the ideological difference between parties is very small, at least the ones that have a chance of getting into office,” Muyangwa told AFKInsider.
But the sub-Sahara’s war-torn regions’ inherent political instability, corruption and resulting regulatory uncertainty can inhibit energy development even in those countries with recent of oil and gas discoveries, while others are seeing heavy foreign investments targeting renewable energy projects.
“I worry more when there’s an abrupt change in government. When there’s an abrupt break, I think foreign investors, partners and others are always looking and say ‘what is this new leadership going to do,’” says Muyangwa.
The Coming Elections
With the upcoming 2015 elections, the changes in regime should theoretically be smooth, but what those changes bring can go either way.
“I think there’s a fear that new leaders may come in and say ‘wait a second, we’re getting ripped off; this previous government didn’t know what it was doing and we’re going to change the terms,’” Cooke told AFKInsider.
Mark Schroeder, Vice President of Africa Analysis at the Austin-based global intelligence and advisory firm Stratfor, says you see that as a common approach in different African countries.
“Re-negotiating; that’s definitely a concern that a lot of new governments bring up. They often have grievances related to the economic policy that the previous government they overthrew had conducted,” Schroeder told AFKInsider.
”And so they would make the case ‘we need to go in and take a fresh look at contracts and agreements made with foreign investors,’ particularly in the hydrocarbon sector or the mining sector,” says Schroeder.
The scheduled Nigerian elections in February 2015 may strain that nation’s political climate against a backdrop of falling crude prices and opposition to President Goodluck Jonathan’s re-election in the north due to the bloody insurgency by Boko Haram.
“In the case of Nigeria, this election is well known. There’s not going to be any case of a sudden over turning of a government,” Schroeder told AFKInsider. “If Jonathan wins or Jonathan doesn’t win, these are known variables in Nigeria and any successor government – whether it’s a Jonathan or Mohammadu Buhari-led administration, will understand the importance of still working closely and supporting the energy sector there.”
That hasn’t always been the case in Nigeria.
“In Nigeria after Obasanjo left office and Yar’Adua came in, a number of contracts involving oil that had been made with the Chinese were voided,” John Campbell, a Senior Fellow for Africa Policy Studies at the New York-based Council on Foreign Relations and U.S. ambassador to Nigeria from 2004 to 2007, told AFKInsider. “So it can happen.”
Other elections scheduled are also worth watching:
Abrupt Changes
Meanwhile, South Sudan has postponed a presidential election set for 2015 due to continued instability and violence; Kenyans have grown increasingly critical of President Uhuru Kenyatta for failing to protect them from escalating militant attacks; and rumors have emerged of a possible military coup in the Democratic Republic of Congo.
“The leaders on the African continent that have stayed way beyond their term limits or are trying to change the constitution so they can prolong their stay in office, I think they’re always vulnerable and there’s always talk about coups,” Muyangwa told AFKInsider.
Burkina Faso’s military forced President Blaise Compaore – who ruled for 27 years – to resign on November 1 for just that reason.
Michel Kafando, a former Foreign Minister and Ambassador to the United Nations, was announced as interim president with support of the opposition and Burkina Faso’s political situation is likely to stabilize after the November 2015 elections.
Interestingly, Burkina Faso’s abrupt leadership change occurred just as several new energy projects were either announced or already underway.
Burkina Faso recently announced plans to electrify 200 villages by the end of 2015 with the help of the Electrification Development Fund, the Project for the Intensification of Power Facilities and Rural Electrification, and the African Development Bank.
Burkina Faso also announced a memorandum of understanding with Singapore to begin receiving Singaporean investors interested in agribusiness, air transport and energy by the end of 2015.
And Canadian-based Windiga Energy announced Oct. 22 it signed a 25-year “power purchase agreement” with the National Electricity Company of Burkina Faso (SONABEL) for a 20 megawatt solar power plant in Zina – the country’s first. Siemens Energy Smart Generation Solutions was selected to build and operate the plant and the project is being funded by the African Development Bank, the Frontier Markets Fund and the Emerging Africa Infrastructure Fund.
Though the project was given the green light to begin construction only 9 days before the military take-over and while Windiga Energy was still finalizing funding agreements with the private sector divisions of the development banks even during – and after – the coup, the company says no worries.
