2023 has turned out to be a year of upsets for African economies. These range from civil unrest in countries like Kenya and Ethiopia to coups, such as the one in Niger in July, as citizens take to the streets to express their dissatisfaction with their governments.
According to the Verisk Maplecroft’s Civil Unrest Index, a risk intelligence firm, 36 African countries experienced a surge in risk between the second quarter of 2022 and the second quarter of 2023, marking the continent’s largest annual increase since the dataset’s inception.
The impact of this instability has harmed the business sector of these countries. Apart from the closing down of businesses during the protests, the government also loses out on the revenue it collects, as everything comes to a standstill, and the country loses out on investment as foreign investors hold off or move to other economies.
Ethiopia’s conflict was thought to be over once Prime Minister Abiy Ahmed took office in 2018. However, after a short time of peace, ethnic relations in Ethiopia again began to deteriorate. The situation has not gotten any better t date, as regions such as Tigray have continued to witness civil conflict. This has resulted in slowing down the development of the Ethiopian economy. According to African Development Bank, between 2005 and 2019, Ethiopia registered an average economic growth of 10.4% per annum. In 2023, AfDB projects the GDP will grow by 5.8%.
As a result of the civil disorder, the country has lost out in a number of sectors. For instance, tourism in the country took a hit as a number of countries flagged the economy as a risk. For example, the United States, through its Department of State Travel, issued an order for its citizens to reconsider travel, on May 2023, to several regions in the country, such as Tigray, Amhara, Oromia and the Afar-Tigray border due to conflict, civil unrest, and crime.
Furthermore, some regions have experienced extended communication blackouts. Tigray, for example, faced a blackout that included a cellular and internet cut-off from the government that lasted for about two years. The result was the loss of millions of dollars in revenue by businesses. Businesses in the area that relied on the internet and cellular were forced to put down their tools as they could not operate as normal. In fact, according to Top10VPN, a London-based VPN review firm, Ethiopian businesses lost Sh20.79 billion ($145.8 million) due to an internet blackout in Tigray in 2022, which affected more than one million people.
The country has also seen its charm as a favourite destination for investors dissipate as the unrest affects foreign-owned businesses. According to Vincent Mutua, an economics professor, the unrest is likely to severely impact foreign direct investment in the affected areas in the short term and prompt investors to suspend operations indefinitely. “The issues that need to be resolved are big, and the government needs to show it can handle them, or fewer investors will move on to other economies as they are wary of the situation,” he said.
In Kenya, after facing the impact of the pandemic and the ongoing Russia-Ukraine war, many thought that the economy would start to show signs of recovery. The economy did improve a bit, but moving onwards, the situation has only worsened, leading to people taking to the streets due to the rising cost of living and the introduction of new tax measures by President Ruto’s administration. The result of the ongoing demonstrations that have become a weekly occurrence has been a thorn in the side of businesses in the country.
Traders in major regions in Kenya have been counting losses as the protests have seen them close down to avoid damage. And even for those, who managed to open up, customers were nowhere in sight as many stayed home, avoiding the disorder. According to John Kalisa, Chief Executive of the East African Business Council (EABC), the protests have caused a decline in business and investments. “The ongoing demonstrations have negative effects on doing business in the region as they disrupt trade and investments,” he said.
With the demonstrations expected to continue, especially after the Court of Appeal temporarily lifted the suspension of the Finance Act 2023, businesses are expected to record more losses. According to the Kenya Private Sector Alliance (KEPSA), Kenya’s economy is losing an estimated Sh2.99 billion ($21 million) daily due to the protests. Furthermore, the protests continue to harm the business that Kenya receives from its landlocked neighbours.
With protests affecting Mombasa as well, businesses with cargo at the port of Mombasa have feared losing it or having it damaged. Also, there have been delays in cargo transport as the protests have affected not only the roads but also the personnel. For instance, recently, truck drivers protested due to a directive by the government for mandatory re-testing for drivers. This directive saw drivers go on strike causing huge losses. According to Roy Mwathi, Chairman of Kenya International Freight and Warehousing Association, the delay has cost them, making many clients reconsider shifting from the port.
“We are the bearers of the delay costs, as we are in charge of clearing and transporting cargo from the port to different countries. This will affect how they consider Mombasa as a port of choice,” said Mr Mwanthi. With the Mombasa port handling about 4,000 containers per day and the SGR only taking about 1,300 of them, the protest affects more than half of the containers. As a result, countries such as Burundi have moved away from the port of Mombasa in favour of Dar es Salaam port, causing Kenya to lose billions.
Also, the recent coup in Niger is set to take the country’s economy back. Considering that the country is one of the poorest economies in the continent, its effect on the business sector will be catastrophic. Citing security and poverty as the main reasons, the military detained President Mohamed Bazoum and seized power. As a result of the coup, many countries worldwide have condemned the act leading to the European Union cutting off aid to the country and the United States threatening the same. With many businesses in the country highly dependent on this financial assistance, the sector has come to a standstill.
Additionally, China, Niger’s second-largest foreign investor after France, has invested billions, especially in oil and uranium. According to U.S. Embassy in Niger, China’s total foreign direct investment (FDI) into Niger stood at Sh381.69 billion ($2.68 billion) at the end of 2020. With the ongoing coup, the country is in a situation it can miss out on further investment from China if nothing changes. This will not only lead to a reduction in investment, but the country would miss out on employment opportunities and other indirect contributions that would have come up.
The situation in three countries tells the story of the challenges many countries face. Several other countries are headed to a similar situation. Even though, in their own right, many feel these demonstrations and coups are necessary to reset their governments to move on the right path, their current impact is catastrophic to businesses and the economy. Support is needed to develop a solution that satisfies the citizens and ensures that the economies are on the right path. (