Violent overthrows add to Africa investor doubts
Reuters, Wed Mar 18, 2009
A spate of violent overthrows in Africa in the past year threatens investor confidence, growth and development at a time the continent had begun to break its reputation for coups and insurrections.
Less than a year since record-high oil and commodity prices had resources companies piling into the poorest continent, a global downturn has investors slamming on the brakes.
After three years without coups, there have been four violent changes of power in eight months, including the toppling of Madagascar's president this week. That gives cautious investors another reason to scale back commitments.
"Although I don't think these instances of instability in Africa are related to each other or part of a pattern, I think there's no doubt external constituents and businesspeople around the world will assume there is a pattern," said Tom Cargill, Africa Programme Coordinator at London thinktank Chatham House.
Military coups in Mauritania and Guinea, this month's assassination of Guinea-Bissau's president and Tuesday's overthrow of Madagascar's elected leader Marc Ravalomanana owe more to national politics than any continental trend.
Each of the countries has its own history of instability and none is a major driver of African economic growth, which the International Monetary Fund has said is already set to slow to 3.5 percent in 2009, half the rate of two years ago.
But increased political stability across Africa in general has often been cited as a reason for investors starting to see it as a frontier region of potentially high returns instead of a place they would not even dabble.
INSTABILITY
The fact coup makers have succeeded without being forced to step down or even face major censure could embolden those who might be tempted to take power in bigger countries, where falling growth is encouraging disaffection.
"Look at ... other African countries, so-called pivotal states: Nigeria is in a terrible state, so is Egypt, so is Kenya, all these so-called big countries," said Hussein Solomon, a political science professor at the University of Pretoria.
Although there is often a tendency to group very diverse African states together, the picture is far from uniform.
Ghana's presidential election two months ago was one of Africa's closest, but avoided major violence, reassuring investors despite an acute fiscal crisis. It followed a year of troubled or disputed elections elsewhere in Africa, however.
South Africa, the continent's biggest economy, holds polls next month expected to be the most closely contested since the end of apartheid in 1994. But corruption charges hanging over the likely future president, Jacob Zuma, and a split within his party are dampening democratic optimism.
Meanwhile, social pressures are growing across Africa as a result of the world economic crisis, which is causing job losses, slashing the export revenues of commodity dependent economies and weakening African currencies.
"I think people are going to get more and more cheesed off as they don't understand what's going on," Solomon said.
"They can not understand how the U.S. sub-prime mortgage climate or the problems in China impact upon commodity prices, impact upon the fiscal viability of African policies, and they are getting angry with their states, and I think this is going to intensify."
DEMOCRACY RECONSIDERED
The dramatic U-turn by rich countries as they bail out or buy up failing industries is also prompting a reassessment of the model sold to Africa by Western donors since the Cold War -- a combination of market capitalism and multiparty democracy.
Cargill said factors were both the financial crisis and the rise of one-party state China, an increasingly important source of investment and trade for Africa.
"I think in future the whole idea of the democratic capitalist system will be tested and questioned, and there will be some who take advantage of its being questioned for their own private ends to launch their own bids for power," he said.
That debate is already taking place at the African Union, whose rules ban unconstitutional seizures of power but whose chairman for the next year, Libya's Muammar Gaddafi, opposes what he says are foreign democratic structures imposed on Africa.
The AU has told Madagascar that any seizure of power by unconstitutional means would be considered a coup d'etat, punishable by AU sanctions or suspension.
But that sits uneasily with Gaddafi's rebuke last week of Mauritania's first democratically elected leader, largely confined to his village after being deposed in a coup last year.
"He must accept the fact ... He is not the first head of state to be overthrown," said Gaddafi, who seized power in 1969.
Whatever the AU rules say, Gaddafi's comments suggest coup leaders may expect an easier ride, at least during his term.
"You can't have a guy who had come to power on 1st September 1969 by means of a military coup telling other people not to engage in unconstitutional transfers of power," Solomon said.
A spate of violent overthrows in Africa in the past year threatens investor confidence, growth and development at a time the continent had begun to break its reputation for coups and insurrections.
Less than a year since record-high oil and commodity prices had resources companies piling into the poorest continent, a global downturn has investors slamming on the brakes.
After three years without coups, there have been four violent changes of power in eight months, including the toppling of Madagascar's president this week. That gives cautious investors another reason to scale back commitments.
"Although I don't think these instances of instability in Africa are related to each other or part of a pattern, I think there's no doubt external constituents and businesspeople around the world will assume there is a pattern," said Tom Cargill, Africa Programme Coordinator at London thinktank Chatham House.
Military coups in Mauritania and Guinea, this month's assassination of Guinea-Bissau's president and Tuesday's overthrow of Madagascar's elected leader Marc Ravalomanana owe more to national politics than any continental trend.
Each of the countries has its own history of instability and none is a major driver of African economic growth, which the International Monetary Fund has said is already set to slow to 3.5 percent in 2009, half the rate of two years ago.
But increased political stability across Africa in general has often been cited as a reason for investors starting to see it as a frontier region of potentially high returns instead of a place they would not even dabble.
INSTABILITY
The fact coup makers have succeeded without being forced to step down or even face major censure could embolden those who might be tempted to take power in bigger countries, where falling growth is encouraging disaffection.
"Look at ... other African countries, so-called pivotal states: Nigeria is in a terrible state, so is Egypt, so is Kenya, all these so-called big countries," said Hussein Solomon, a political science professor at the University of Pretoria.
Although there is often a tendency to group very diverse African states together, the picture is far from uniform.
Ghana's presidential election two months ago was one of Africa's closest, but avoided major violence, reassuring investors despite an acute fiscal crisis. It followed a year of troubled or disputed elections elsewhere in Africa, however.
South Africa, the continent's biggest economy, holds polls next month expected to be the most closely contested since the end of apartheid in 1994. But corruption charges hanging over the likely future president, Jacob Zuma, and a split within his party are dampening democratic optimism.
Meanwhile, social pressures are growing across Africa as a result of the world economic crisis, which is causing job losses, slashing the export revenues of commodity dependent economies and weakening African currencies.
"I think people are going to get more and more cheesed off as they don't understand what's going on," Solomon said.
"They can not understand how the U.S. sub-prime mortgage climate or the problems in China impact upon commodity prices, impact upon the fiscal viability of African policies, and they are getting angry with their states, and I think this is going to intensify."
DEMOCRACY RECONSIDERED
The dramatic U-turn by rich countries as they bail out or buy up failing industries is also prompting a reassessment of the model sold to Africa by Western donors since the Cold War -- a combination of market capitalism and multiparty democracy.
Cargill said factors were both the financial crisis and the rise of one-party state China, an increasingly important source of investment and trade for Africa.
"I think in future the whole idea of the democratic capitalist system will be tested and questioned, and there will be some who take advantage of its being questioned for their own private ends to launch their own bids for power," he said.
That debate is already taking place at the African Union, whose rules ban unconstitutional seizures of power but whose chairman for the next year, Libya's Muammar Gaddafi, opposes what he says are foreign democratic structures imposed on Africa.
The AU has told Madagascar that any seizure of power by unconstitutional means would be considered a coup d'etat, punishable by AU sanctions or suspension.
But that sits uneasily with Gaddafi's rebuke last week of Mauritania's first democratically elected leader, largely confined to his village after being deposed in a coup last year.
"He must accept the fact ... He is not the first head of state to be overthrown," said Gaddafi, who seized power in 1969.
Whatever the AU rules say, Gaddafi's comments suggest coup leaders may expect an easier ride, at least during his term.
"You can't have a guy who had come to power on 1st September 1969 by means of a military coup telling other people not to engage in unconstitutional transfers of power," Solomon said.