2019 fourth-quarter forecast

Sub-Saharan Africa

Sub-Saharan Africa is a study in diversity. Covering an area that spans the entire width of the continent beginning at the Sahara Desert and ending at the southernmost tip of South Africa, the region is home to countless cultures, languages, religions, plants, animals and natural resources. It’s no surprise that it captured the imagination of Europe’s earliest explorers — and that it continues to capture the imagination of current world powers eager to exploit it. And yet despite the region’s diversity, Sub-Saharan African countries have common challenges — transnational terrorism, rapid population growth, endemic poverty and corruption — that prevent them from capitalizing on their economic potential. The coming years will be critical for the region, especially as its political institutions mature in a rapidly globalizing world.

6 MINS READSep 20, 2019 | 20:16 GMT
Covering an area that spans the entire width of the continent beginning at the Sahara Desert and ending at the southernmost tip of South Africa, Sub-Saharan Africa is home to countless cultures, languages, religions, plants, animals and natural resources.
(Radek Borovka/Shutterstock.com)

Covering an area that spans the entire width of the continent beginning at the Sahara Desert and ending at the southernmost tip of South Africa, Sub-Saharan Africa is home to countless cultures, languages, religions, plants, animals and natural resources.

Key Trends for the Quarter

The Shadow of Power Outages Looms in South Africa

High demand amid the summer heat will precipitate power outages that limit economic growth in South Africa in the fourth quarter. Worker unions at the public electric utility Eskom as well as factions in the ruling African National Congress will continue to oppose reforms at the company that involve privatization and job losses, limiting President Cyril Ramaphosa's options for halting its deterioration.

Credit agency Moody's, the last of the big three agencies not to downgrade South Africa's credit rating to junk status, will reassess its position in November.

The diversion of billions of dollars to shore up Eskom has left the government no choice but to address its debt problem or deal with the consequences. Credit agency Moody's, the last of the big three agencies not to downgrade South Africa's credit rating to junk status, will reassess its position in November. While global markets already consider South Africa's bonds as junk, a Moody's downgrade would force fund managers with investment-grade mandates to dump remaining South African debt, accelerating ongoing foreign investment outflows. 

In October, the legislature will debate a worrisome topic for investors: land expropriation without compensation. While Ramaphosa and his allies will seek expropriation in a few limited cases, populist factions in the ANC and the far-left Economic Freedom Fighters will push for more drastic seizures, increasing investor fears over the country's direction. Meanwhile, failures to improve economic growth have dire implications beyond the fourth quarter for Pretoria, as skilled laborers and individuals with high net worth flee the country, hurting growth in sectors like health care and professional services and increasing unemployment and crime. For more on South Africa's worsening situation, check out this analysis.

Ethiopia Contends With Growth Challenges and Key Votes

Negative economic indicators, including high inflation, foreign exchange shortages and decreasing exports, will compel the Ethiopian government in the fourth quarter to proceed with its liberalization push to spark greater private-sector growth. Moves toward the full or partial privatization of state-owned enterprises will eventually ease foreign debt and improve efficiency. Better roads between Ethiopia and Eritrea should also facilitate the movement of goods once the latter opens border crossings. These changes, however, will not noticeably improve the economy in the fourth quarter, adding to the governing coalition's burden ahead of contentious elections in 2020.

Politics will be increasingly volatile in the fourth quarter as elections approach. This will slow Ethiopia's efforts to promote regional integration during the quarter and into 2020 as Prime Minister Abiy Ahmed works to guarantee his political survival. On Nov. 13, Ethiopians will vote on whether to grant the Sidama people their own state. Violence in the weeks surrounding the Sidama referendum is likely. Hawassa, an important city in the heart of Sidama, will be especially vulnerable, putting nearby industrial parks and supply chains in jeopardy. Whatever the vote's outcome, it could inspire numerous other ethnic groups to seek their own states, potentially triggering more interethnic violence in the immediate aftermath of the poll and perhaps for weeks thereafter. For more on Ethiopia's transition, read the following analysis.

Transitional Government Institutions Take Root in Sudan

Transitional institutions will continue to solidify in Sudan following agreements between military and civilian stakeholders and the appointment of a sovereign council and Cabinet during the third quarter. While the Cabinet will begin exercising its powers and members of the civilian opposition will take their place in a new legislative body, Sudan's military will maintain its strong position as it tries to influence the transitional process in the fourth quarter and beyond.

Relative stability during the fourth quarter — and the continued support of foreign benefactors — means economic conditions could start to improve in Sudan.

The Cabinet will initially focus on remedying Sudan's dire economic situation. Minor standoffs over policy between military and civilian members of the sovereign council may emerge, particularly with regard to the funding and structure of the security forces, but this is unlikely to severely disrupt the transitional agreement in the fourth quarter. The technocratic Cabinet, which is led by an economist, will likely take a pro-business stance in initial policies.

Relative stability during the fourth quarter — and the continued support of foreign benefactors — means economic conditions could start to improve. Sudan's allies, particularly Saudi Arabia and the United Arab Emirates, will approve of these developments. Civilian representatives will likely tread carefully around issues that matter most to those backers, such as security ties or economic interests, to avoid blowback from Sudanese military representatives in the transitional bodies. This, plus the need for external financial support, means Khartoum will continue to become more engaged with the region during the quarter. For more on Sudan's post-Omar al Bashir transition, see the following analysis.

Relative stability during the fourth quarter — and the continued support of foreign benefactors — means economic conditions could start to improve. Sudan's allies, particularly Saudi Arabia and the United Arab Emirates, will approve of these developments. Civilian representatives will likely tread carefully around issues that matter most to those backers, such as security ties or economic interests, to avoid blowback from Sudanese military representatives in the transitional bodies. This, plus the need for external financial support, means Khartoum will continue to become more engaged with the region during the quarter.

For more on Sudan's post-Omar al Bashir transition, click here.

Additional Forecasts

These Stratfor assessments provide additional insights for the quarter

Key Dates to Watch

  • October: South Africa's parliament begins debating a bill that would permit land expropriation without compensation.
  • Oct. 15: Mozambique holds general elections.
  • Oct. 24: The first-ever Russia-Africa forum occurs in Sochi, Russia.
  • November: Moody's reassesses South Africa's credit rating.
  • Nov. 13: Ethiopia conducts a referendum on statehood for Sidama.
  • December: Summer heat is likely to strain South Africa's unstable electrical grid.
  • December: In Ethiopia, a self-imposed deadline expires regarding the issuance of telecommunications licenses to foreign multinationals. Depending on Addis Ababa's decision, EthioTelecom's long monopoly over the market could end.

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