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Businesses in Africa worried about market volatility and political risks

Companies operating in Africa increasingly worry about the unpredictable business environment where markets are volatile (#1) and political perils, such as protectionism or terrorism are on the rise.

Other growing concerns are digital dilemmas arising from new technologies and cyber risks (#6), as well as natural catastrophes (#7). These are the key findings of the 6th annual Allianz Risk Barometer analyzing corporate risks globally, as well as by region, country, industry and size of business.


“Most African countries such as  South Africa and Nigeria face macroeconomic challenges including low commodity prices, the Chinese slowdown and the tightening of US monetary policy and also suffer their own internal pressures such as inflation, weak domestic demand and socio-political tensions,” says Delphine Maïdou, CEO of AGCS Africa.


To mitigate volatility risks and anticipate any sudden changes of rules that could impact markets, companies around the world will need to invest more resources into better monitoring politics and policy-making around the world in 2017. According to trade credit insurer,  Euler Hermes, a subsidiary of Allianz SE, since 2014, there have been 600 to 700 new trade barriers introduced globally every year.


While conventional terrorism is a real concern, the growing risk of political violence events such as war, civil war, insurrection and other politically motivated incidents which focus on countries – particularly in Middle East and Africa – rather than certain locations should not be underestimated, according to Christof Bentele, Head of Global Crisis Management, AGCS. “The impact for globally operating businesses and our customers can be much greater and longer-lasting,” he says.  


“Instability in African states such as Burundi, The Gambia, Democratic Republic of Congo, Libya, Somalia and South Sudan is a chief concern as well as the persistent Islamic terrorism of Boko Haram in some parts of  Nigeria,” adds Bentele.


Globally, business interruption (BI) continues to lead the ranking for the fifth year in a row, primarily because it can lead to significant income losses, but also because multiple new triggers are emerging, especially non-physical damage or intangible perils, such as cyber incidents, and disruption caused by political violence, strikes and terror attacks.

 

This trend is driven, in part, by the rise of the “Internet of Things” (IoT) and the ever-greater interconnectivity of machines, companies and their supply chains which can easily multiply losses in case of an incident. Companies are also facing potential financial losses with the changing political landscape leading to fears of increasing protectionism and anti-globalization.


“Companies worldwide are bracing for a year of uncertainty,” says Chris Fischer Hirs, CEO of Allianz Global Corporate & Specialty (AGCS) SE. “Unpredictable changes in the legal, geopolitical and market environment around the world are constant items on the agenda of risk managers and the C-suite. A range of new risks are emerging beyond the perennial perils of fire and natural catastrophes which require re-thinking of current monitoring and risk management tools.”


At the same time, increasing reliance on technology and automation is transforming, and disrupting, companies across all industry sectors. While digitalization is bringing companies new opportunities, it is also shifting the nature of corporate assets from mostly physical to increasingly intangible, bearing new hazards, above all cyber risks (30% of responses).

 

Companies ranked cyber threats a close #3 globally, climbing to #2 across the Americas and Europe and the top risk in Germany, the Netherlands,  South Africa and the UK. At the same time, it is the top concern globally for businesses in the information and telecommunications technology and the retail/wholesale sectors.


“Cyber incidents is ranked #5 in Africa with the most common threats being from hackers, disgruntled employees, negligence and competitors,” says Nobuhle Nkosi Head of Financial Lines AGCS Africa. “This is doubled-edged sword to the continent as Africa has a particular role in embracing and responding to new technologies compared to mature markets while speeding up cyber security and personal data protection legislations.”


The threat now goes far beyond hacking and privacy and data breaches, although new data protection regulations will exacerbate the fall-out from these for businesses. Time is running out for businesses to prepare for the implementation of the new General Data Protection Regulation across Europe in 2018 – although the cost of compliance will be high, the penalties of not doing so could be even higher.

 

Meanwhile, increasing interconnectivity and sophistication of cyber-attacks poses not only a huge direct risk for companies but also indirectly via exposed critical infrastructures such as IT, water or power supply. Then there is the threat posed by technical failure or human error, which can lead to long-lasting and widespread BI exposures. In the digitalized production or Industry 4.0 environment, a failure to submit or interpret data correctly could stop production.

 

Businesses need to think about data as an asset and what prevents it from being used. Results also show that smaller companies may be underestimating cyber risk: in this category (revenues <€250 million), cyber ranks only #6. However, the impact of a serious incident could be much more damaging for such firms.

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Dark days as Aviation industry collapses

22nd November 2020
Air Botswana

As the Aviation industry takes a COVID-19 pummeling, for Africa the numbers are staggering, Chief Executive Officer of the International Air Transport Association (IATA), Alexandre de Juniac has observed.

Speaking recently at the African Airlines Association (AFRAA) has been hosting an Annual General Assembly, de Juniac said traffic is down 89% and revenue loses are expected to reach $6 billion. And this figure is likely to be revised downwards in the next forecast to be released later this month. “But the impact is much broader. The consequences of the breakdown in connectivity are severe,” he surmised.

According to de Juniac, five million African livelihoods are at risk while aviation-supported GDP could fall by as much as $37 billion. That’s a 58% fall.

“We have a health crisis. And it is evolving into a jobs and economic disaster. Fixing it is beyond the scope of what the industry can do by itself.”

He said they need governments to act, “And act fast to prevent a calamity.”

“We are in the middle of the biggest crisis our industry has ever faced. As leaders of Africa’s aviation industry, you know that firsthand. Airline revenues have collapsed. Fleets are grounded. And you are taking extreme actions just to survive. We all support efforts to contain the COVID-19 pandemic.  It is our duty and we will prevail. But policymakers must know that this has come at a great cost to jobs, individual freedoms and entire economies,” he said.

de Juniac used the AFRA general assembly platform to amplify IATA’s call for governments to address two top priorities: “The first is unblocking committed financial relief. Airlines will go bust without it. Already four African carriers have ceased operations and two are in administration. Without financial relief, many others will follow.”

Over US$31 billion in financial support has been pledged by African governments, international finance bodies and other institutions, including the African Development Bank, the African Union and the International Monetary Fund.

Unfortunately de Juniac pointed out, in his words, “Pledges do not pay the bills. And little of this funding has materialized. And let me emphasize that, while we are calling for relief for aviation, this is an investment in the future of the continent. It will need financially viable airlines to support the economic recovery from COVID-19.”

The second priority, according to IATA is to safely re-open borders using testing and without quarantines.

“People have not lost their desire to travel. Border closures and travel restrictions make it effectively impossible. Forty-four countries in Africa have opened their borders to regional and international air travel. In 20 of these countries, passengers are still subject to a mandatory 14-day quarantine. Who would travel under such conditions?” de Juniac quizzed rhetorically.

He suggested that countries should adopt systematic testing before departure provides a safe alternative to quarantine and a solution to stop the economic and social devastation being caused by COVID-19.

He admitted that it’s a frightening time for everyone, not least the millions of people whose livelihoods depend on a functioning airline industry. Right now, de Juniac said there essentially is no airline industry. He cited the example that China’s largest airlines sound optimistic, but in a vague way. “They gave no hard data about current yields, loads, or forward bookings, discussing only developments in 2019. Boy, does that seem like ages ago.”

Aviation’s darkest days

The IATA CEO said these are the darkest days in aviation’s history. “But as leaders of this great industry I know that you will share with me continued confidence in the future.

Our customers want to fly. They desire the exploration that aviation enables. They need to do international business that aviation facilitates. And they long to reunite with family and loved ones.”

He said the industry will, no doubt, be changed by this crisis, but flying will return. “Airlines will be back in the skies. The resilience of our industry has been proven many times. We will rise again,” he said.

de Juniac said Aviation is a business of freedom. “For Africa that is the freedom to develop and thrive. And that is not something people on this continent will forget or lose their desire for.”

 

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Business

Inflation increased to 2.2% in October 2020

22nd November 2020

Headline inflation increased from 1.8 percent in September to 2.2 percent in October 2020, but remained below the lower bound of the Bank’s medium-term objective range of 3 – 6 percent, and lower than the 2.4 percent in October 2019.

According to Statistics Botswana, the increase in inflation between September and October 2020 mainly reflects the upward adjustment in domestic fuel prices {Transport (from -3.9 to -2.5 percent)}, which is estimated to have increased inflation by approximately 0.29 percentage points.

“There was also a rise in the annual price increase for most categories of goods and services: Alcoholic Beverages and Tobacco (from 6.2 to 6.6 percent); Clothing and Footwear (from 2.5 to 2.7 percent); Communications (from 0.6 to 0.9 percent); Housing, Water, Electricity, Gas and Other Fuels (from 6.4 to 6.6 percent); Recreation and Culture (from 0 to 0.2 percent); Miscellaneous Goods and Services (from 0.7 to 0.9 percent); Food & Non-Alcoholic Beverages (from 4.2 to 4.3 percent); and Furnishing, Household Equipment and Routine Maintenance (from 2 to 2.1 percent). Inflation remained stable for: Education (4.7 percent); Restaurants and Hotels (3 percent); and Health (1.5 percent). Similarly, the 16 percent trimmed mean inflation and inflation excluding administered prices rose from 1.8 percent and 3.1 percent to 2.2 percent and 3.4 percent, respectively, in the same period.”

[Source: Bank of Botswana]

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BDC injects further P64 million into Kromberg & Schubert

22nd November 2020
BDC

Botswana Development Corporation (BDC) has to date pumped a total of P100 million into the expansion of Kromberg and Schubert, a car harnessing manufacturing company, operating from Gaborone Old Naledi.

At the official ground breaking ceremony of the company‘s new warehouse today, BDC Managing Director, Cross Kgosidiile revealed the wholly state owned investment corporation has pumped P64 million into the expansion which entailed building of the new warehouse.

Kgosidiile explained that this follows another expansion project which was successfully launched in 2017, in which BDC invested P36 million, bringing the total investment into Kromberg at P100 million. The MD also acknowledged Botswana Investment and Trade Centre (BITC) as a partner in the project and for having facilitated the acquisition of the land.

 

Giving a keynote address, Minister of Investment, Trade & Industry, Peggy Serame highlighted the importance of infrastructural development in growing the local manufacturing sector and transforming the economy of Botswana.

Serame underscored the value of strategic partnerships between Government and the private sector, noting that when the two work together and pull together in one direction results will be evident and jobs will be created.

“With the prevailing conditions of depressed economy occasioned by COVID-19 pandemic, government is reliant on entities like BDC to bring in revenue and acceleration of private sector development in line with its mandate and strategic plan. This plan is supported by the need to invest in growth sectors and accelerate the implementation of the Economic Diversification Drive,” Serame said.

Minister Serame noted that the partnership between BDC and Kromberg & Schubert begun in 2017 when the P36 million, 4100 square metres factory expansion for the company was launched.

 

She said the launch of the 7320 square meters factory expansion, to be built at the tune of P64 million signals the continuation of the good partnership between the two companies.

 

“I must commend BDC for their continuous efforts to build partnerships with the private sector geared towards contributing to economic development of this country.”

 

Minister Serame also added that BITC through its robust investor aftercare programme continues to provide value added and red carpet to Kromberg and Schubert under their One Stop Service Centre.

 

“In this regard BITC facilitated acquisition of land to enable this expansion. I therefore would like to commend BITC for their timely facilitation to make this expansion possible,” the minister said.

 

Kromberg & Schubert was incorporated in Botswana in 2009; The Company has grown to asset its position as a significant player in the regional automotive industry value chain.

 

The company is also a critical player in the economic development of Botswana, it currently employs 2100 Batswana across its operations. Kromberg exports on average P2.0 billion worth of goods annually, contributing significantly to foreign exchange.

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