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News & Events

Africa Commercial Insights, Issue 10


  • DRC: Death of key opposition leader creates further uncertainty in the transition process
  • Somalia: What does a new president mean for Somalia?
  • South Africa: Reasons for cautious optimism in M&A sector, despite significant slowdown in 2016

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DRC:  Death of key opposition leader creates further uncertainty in the transition process

The Issue: 84 year old veteran opposition leader, Etienne Tshisikedi, died last week at a hospital in Brussels after suffering from a long-standing illness. As the key opposition leader, his death leaves a void in the DRC’s fragile political transition process, and negotiations will likely remain at a standstill until after his funeral at the end of this week. Although Tshisikedi was known to be in poor health, his death nevertheless came as a surprise to the general public and there was uncertainty among supporters as to how they should react. Tension briefly rose after people gathered outside Tshisikedi’s home in Kinshasa, only to be dispersed by police with tear gas.

The Insight: For all the uncertainty that Tshisikedi’s death creates, IPSA assesses that it is unlikely to fundamentally de-rail the transition process in the current climate. Relative unity and consensus within Congolese opposition has held. Whilst this event clearly presents an opportunity for Kabila to exploit, a well-placed source close to the presidency told IPSA that the unpredictability of the Congolese public means any bold move on President Kabila’s part would be “playing with fire”. The source suggested that what is more likely is a renewed attempt to stall the process. Kabila has already stated to opposition leaders that he needs to be presented with three candidates for the position of Prime Minister of the transitional government – rather than the sole candidate currently presented, Felix Tshisikedi; Etienne Tshisikedi’s son.  This was not stipulated in the original negotiated agreement and is evidence of Kabila testing the water. Kabila needs to formally accept an opposition candidate by the end of next week, and failure to respect this deadline should be considered a red flag.

In the interim, two additional developments should also be of note to those with interest in the DRC. Last week marked a milestone in the on-going electoral process, as the number of voters registered passed 10 million. A source close to the DRC’s National Electoral Commission (CENI) stated that when numbers reach 20 – 25 million, an election would be considered legitimate. Emphasis to date has focused on rural regions, and the large cities are still yet to undergo registration, which should see the total increase quickly. The source anticipates completion of voter registration by October at the latest, leaving scope for an election to be organised by the end of 2017 or early 2018. Also of note is Angola’s recent public statement that Kabila must respect the DRC constitution. Comments from the Dos Santos administration on the politics of other African states is rare, but given the potential instability further unrest could cause for Angola – potentially two million displaced Congolese seeking refuge within its borders – the regional power is keen to make its concerns clear. Angola has intervened twice with troops in Kinshasa to restore peace, and its interpretation of events, alongside those of the new US administration and France, should be followed closely.

Somalia: What does a new president mean for Somalia?

The Issue: On Wednesday evening members of Somalia’s parliament elected a new president, former Prime Minister Mohamed Abdullahi “Farmajo”. Despite concerns of a possible attack from Al-Shabab, the unusual election process passed without major incident – parliamentarians cast their votes from within a heavily fortified airport –  and  all parties appeared to accept the legitimacy of the result. For the first time in the country’s history, the election was preceded by a televised debate in which presidential candidates had the chance to put forward their vision for Somalia. Security and anti-corruption drives dominated the agenda, and such priorities are reflected in the choice of Farmajo as President.

The Insight: A senior political source with very close ties to the former Somalian presidency informs IPSA that President Farmajo’s election has been almost universally welcomed by Somalians of all tribal groups. Of particular importance is the strong support Farmajo commands from Somalia’s military. Mogadishu was described as “alight with bullets” on Wednesday night as soldiers celebrated by firing shots into the air. A former senior official of the Somali Central Bank, with key oversight of state payments, noted to IPSA that many soldiers have not been paid in almost 8 months. During President Farmajo’s brief position as Prime Minister in 2010-2011, he introduced a monthly stipend for soldiers gaining him widespread popularity. Military support puts the new President is in a better position than most to improve the country’s extremely fragile security situation. Sources IPSA spoke with were confident in his capacity to reduce the influence that militant group Al-Shabab continues to hold across large swathes of the country. In addition to his strength in security, President Formajo’s notable track record in anti-corruption measures is also seen as a key source of popular appeal in the wake of an out-going presidency dogged by corruption allegations. As Prime Minister, Formajo set up an anti-corruption commission and made it a requirement for government ministers to seek approval from his office before conducting overseas trips to reduce government expenditure. President Formajo’s election offers legitimate reasons for cautious optimism about the trajectory of Somalia. Widespread popular support, both internally and amongst Somalia’s influential diaspora, is a strong base from which to start. The challenges he faces in terms of curbing the terrorist threat, reducing small arms racketeering, running a prudent government, and growing the economy, should not however be underestimated, and remain colossal in scale.

South Africa: Reasons for cautious optimism in M&A sector, despite significant slowdown in 2016

The Issue: Recent figures have revealed that South Africa – historically one of the continent’s key drivers for M&A transactions – was hit by a significant slowdown in M&A activity in 2016. Figures released in the Global Transactions Forecast issued by global law firm Baker McKenzie, show that 211 M&A deals were finalized in South Africa in 2015 which dropped by almost half to 115 deals in 2016. Baker McKenzie expressed a positive outlook for South Africa moving forward and predict a 66% rise in M&A transactions over the next two years; the availability of strategic assets at reduced rates serving as a key stimulus. Despite cautious optimism, several reasons for concern remain.

The Insight: In 2016, the global M&A transactional trend continued to be affected by the ongoing slump in the price of oil and commodities.  The uncertainty surrounding major political events such as the US election and Brexit added to the hardship. The situation has been exacerbated in South Africa, however, where the deal-making environment has been dogged by a combination of global headwinds and an unstable domestic landscape. IPSA notes that political instability, a weakening economy, currency volatility and the looming risk of an investment status downgrade rating have all contributed to the current slowdown in South Africa’s M&A activity. Despite this, IPSA’s financial sources in Johannesburg anticipate a short-term uptick in outbound investments from South African firms into other parts of Africa, the United States and Europe as they look to new markets to secure foreign revenue and hedge against the volatile rand. A leading JSE equity investor added both outbound and inbound deal flow in the next few years will likely benefit from the discount prices of strategic assets, such as those within the mining sector. High levels of docile private equity capital and the continuing availability of cash on company balance sheets will also be an asset. IPSA assesses investors will be keeping a close eye on the build-up to the ANC elective conference in December this year, with hopes of seeing Zuma replaced as President of the ANC. A well-placed diplomatic source informed IPSA,  “Zuma is very weak politically and his anticipated departure following the December elections should bring with it investor optimism.” The source warned, however, that until Zuma hands over the reins of the ANC to a successor, investors should remain wary of political maneuvering, citing an attack on Finance Minister Gordhan as a possibility following the announcement of the State Budget in a couple of weeks’ time.

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