Roddy Barclay, head of intelligence and analysis at Africapractice, looks at five key African markets which face notable challenges in the year ahead.

Nigeria

Former Vice President Atiku Abubakar’s defection from the ruling APC to the opposition PDP in November 2017 feels like a starting gun for a year that will no doubt see electoral politics rise to the fore once again ahead of elections in February 2019.

President Muhammadu Buhari’s ill-health over the course of his first term in office is the main uncertainty leading into the year. His backers are rallying behind him to run for a second term, and if he takes this option, the rest of his party – including key power-brokers from the south-west – will likely fall in line, signalling continuity in the medium-term political outlook. Yet any further deterioration in Buhari’s health, or a decision not to run, will open the floodgates for a political scramble to succeed him. This could undo the ruling APC’s internal alliances as personal ambitions and regional rivalries trump what remains a nascent party structure.

The PDP is unlikely to regain the advantage and triumph at the national level having struggled to overcome its own internal differences and regain stature. But floor-crossing and fragmentation of the APC could create a weaker centre of power which complicates policymaking and the process of governing amid continual political distractions. Businesses will feel the impact of creeping electoral politics, but Nigeria is poised to regain stature in 2018 as the country claws its way back into economic recovery and reclaims its position as one of Africa’s foremost economies.

South Africa

Cyril Ramaphosa’s victory in the ANC’s seminal elective conference in December 2017 has been celebrated in many quarters. For those who have tired of the sleaze and political intrigue headlines which have become a daily feature of South African politics under President Jacob Zuma, the result was a rejection of the status quo and an opportunity to hold the state accountable once more.

Yet while Ramaphosa is probably the best person for the job, he faces a monumental task ahead of him in 2018. He will also be shackled by the deep fault-lines that now run through his party, evidenced not just in the factional split of the top-six leadership positions that surround him, but throughout the ANC’s party structures.

We anticipate that Ramaphosa will stay true to his commitment to taking a tougher line on graft, and pushing for investigations into some of the allegations which have blighted Zuma’s political career. The President may well even find himself forced from office in the coming weeks, but he will be reluctant to leave without some form of guarantees, and this will dominate South African political debate in the short term.

On the policy front, once Ramaphosa has the reins of power, he is likely to be pragmatic in his approach, not bending to the wind of populism, nor responding wholeheartedly to the demands of business and financiers. Several of the more controversial decisions made by Zuma in recent months – including around the nuclear deal, state agency bailouts and the new mining charter – are likely to come under scrutiny.

Ramaphosa is also likely to put in place a cabinet with reassuringly technocratic figures in strategic posts. And while his rhetoric will sometimes see populist overtures on the need to drive a more radical economic transformation agenda, for the most part, policy interventions and reforms will tow a more cautious line. Importantly, Ramaphosa’s tentative approach will limit the prospects for radical reform and progress – at least until he can gain a stronger foothold after the 2019 elections.

Zimbabwe

The euphoria that accompanied Robert Mugabe’s overthrow is already giving way to a recognition of the realities that Zimbabwe finds itself in. The economy has shrunk to less than half its size since 2000, when the country defaulted on its external debt. While Chinese support provided some alleviation to a steadily worsening economic situation, in recent years even the Chinese have been reluctant to reach for the wallet. The country’s new president, Emmerson Mnangagwa, faces a tough task to convince the international and business community that Zimbabwe is changing its ways. But while he is undoubtedly a stalwart ZANU-PF figure, he has also shown signs in recent months that he is committed to reform.

Mnangagwa has made a cautious start, appointing a cabinet that blends competent officials in key posts with military and political stalwarts who can help steady the ship in a time of volatility. He is likely to focus his initial energies on courting the international community to secure a debt write-off – a process that will likely require a willingness to agree to political and electoral reforms. With Mnangagwa enjoying a groundswell of support after Mugabe’s overthrow, and the opposition remaining in a state of relative disarray, he may just bite this bullet. But he will also tread cautiously, knowing he remains answerable to vested interests in his party and in the military old-guard. This will be evident in the ruling party’s approach to national elections, scheduled for July 2018, but subject to change given the current political flux and uncertainty.

With Mnangagwa and ZANU-PF looking likely to remain in power beyond the next elections, much attention will also be given to their policy stance. We anticipate a move away from the disastrous indigenisation agenda, with efforts to re-assure and re-engage with investors. This will see Zimbabwe’s economic growth pick up apace, given the huge potential and strong human capital the country still holds. But the country will be starting from a low base after nearly two decades of decline, and it will take years to rebuild an economy that has been brought to its knees. While there may be some bargains for those with a risk appetite, many investors and financiers remain wary of dealing with a party that has such a poor track record on meeting its commitments and providing stable guarantees to investors.

Tanzania

The ‘Magufuli way’ has seemed like an unstoppable force since President John Magufuli came to power in November 2015, promising to clean up the system and recalibrate the state’s relationship with the private sector. Magufuli has reduced losses and leakages within the state apparatus, while taking a tough stance on fiscal and regulatory compliance.

Yet the authorities’ committed approach to increasing internal revenue generation and tackling corruption has at times looked over-zealous and broad-brushed, capturing compliant and ethical companies in a net of politicised state intrusion. This has elicited accusations that Tanzania is returning to its socialist roots, and fostered a climate of frustration and despair within parts of the private sector. As such, businesses that were previously in growth-and-investment mode, are now battening down the hatches to manage these emergent political, fiscal and regulatory risks.

In 2018, we anticipate that these dynamics will become increasingly evident in the real economy. Amid tough operating conditions, there are already signs that non-performing loans are spiking and lending to the private sector is on the decline. More broadly, business confidence is down and new investors are feeling wary of a government which at times appears more interested in securing populist wins and re-asserting the state’s central role than attracting and partnering with private investment. Commercial results and foreign investment streams in 2018 will expose these issues, even if a continued state-led investment drive preserves reasonably robust growth levels. The interesting thing to watch will be whether the private sector’s travails resonate politically.

The opposition remains a weak force, and Magufuli’s detractors in the CCM are wary of challenging the status quo for fear of being seen to be against the party and the anti-corruption drive. But there are increased rumblings of discontent and the data will likely bear that out in 2018, potentially fostering more debate across the political landscape, and even a softening of government approach on some issues impacting business. Much will depend on Magufuli’s temperament and response, given how central he has become to the ruling system.

Kenya

Kenya limps into 2018 after its protracted electoral cycle, but will likely emerge stronger once the year is out. The dust has yet to settle on Uhuru Kenyatta and the Jubilee Party’s electoral victory, and the political landscape will remain dominated by the fallout in the short-term. Going forward, we anticipate a continual tussle for priority between the President’s camp and that of his deputy as Kenyatta seeks to secure a legacy and Ruto eyes succession.

Despite a determined effort by the opposition to challenge the legitimacy of the poll after their boycott of the re-run, we anticipate that they will struggle to maintain momentum as the Jubilee administration gets back to the business of running the state. If the opposition does seek to raise the tempo, we can anticipate a forceful response from government with legal measures to curb political challenges, and tough policing if it spills into the streets again.

Revitalising the economy will be Kenyatta’s first priority once his appointments are all in place. The government will focus on development-oriented priorities around job creation, affordable housing, food security and universal healthcare, but it will also need to tackle the thornier issue of its rising debt profile.

There have been limited signs to date that the Kenyatta administration has the appetite to reel in wasteful public expenditure, restructure debt and build a more sustainable macro-economic management framework. But Kenyatta’s second term presents a window for this, which will perhaps be the greatest test of his leadership.

It also remains to be seen whether the government in its drive to improve service delivery is also going to be more committed to tackling the governance shortfalls which were a clarion call for the opposition in the elections. A tougher stance on corruption in particular will be essential to re-setting the political narrative in Kenya after an underwhelming first term.