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Lusa - Business News - Angola: Country full of risks for investors in run-up to elections - analyst

Lisbon,Aug.4,2022(Lusa)- Africa, particularly Angola, is an attractive market for investors, but one that is full of risks in the run-up to the Angolan elections, says analyst Laura Seara Cabeça, from the Risk Advisory Group.
The senior associate in the sub-Saharan Africa team at Risk Advisory Group believes, in an article in InvestmentMonitor, that foreign investors who re-engaged with Africa after the continent's economic crisis caused by Covid-19, will now be "attracted by attractive returns offered by large infrastructure projects, often promoted ahead of elections."
"When vying for contracts at this time, investors may face two main risks: high corruption risks as bidding processes become rushed and a fragile political context that threatens the progression of business," warns Laura Cabeça.
As voters are eager to see their political leaders pursue national development goals and increase employment opportunities, they "tend to make big infrastructure promises in the run-up to elections, hoping to bolster their prospects at the ballot box", she says.
In this context, she stresses that "a case in point at the moment is that of the Angolan president, João Lourenço, promising a series of large-scale projects, including multi-billion dollar solar parks, to help diversify the country's economy, as he prepares for a presidential vote on 24 August.
The analyst also warns that in the rush to get deals done before the vote starts, some leaders may also speed up contract award processes. But "potential candidates need to be mindful of heightened compliance risks in the face of the possibility of procedural shortcuts and incentives to sign contracts."
"In short, at election time, due process of law in business transactions is less likely to be followed," she stresses.
Furthermore, rather than participating in a competitive bidding process, at this time "investors may find themselves invited to opaque direct negotiations" and "the lack of visibility increases the potential for bribery and other forms of corruption", she highlights.
"There is also the possibility of a tender being issued without internal government agreement on the contractor selection criteria, which can lead to future doubts about the integrity of the deal".
And even in open tender processes, the successful investor may be vulnerable "to seeking a forced shareholding, where they are invited to partner with a local company, possibly owned by individuals with political connections or even representatives of government officials".
Then, "there are post-transaction risks linked to the results of the polls". And while in the past, African elections "were often predictable" given the advantages of those in power, in recent years, "a shift towards more democratic governance across the continent has seen opposition figures triumph in presidential elections with increasing frequency", the analyst believes.
In this scenario, "investors face vulnerabilities", either because elections provide continuity or because they dictate "peaceful transfers of power".
But even when incumbents manage to hold on after elections, "investors may find that the pace at which decisions were made before elections slows markedly as cumbersome and overburdened bureaucracies catch their breath," she adds.
"Leaders with renewed mandates may also want to reorganise their administrations - which can take time, especially if complex political factors need to be weighed up and accommodated - or be sidetracked by post-election allegations of election fraud. All this could lead to stagnation, with costly delays in infrastructure projects," highlights the Risk Advisory Group analyst.
However, Laura Seara Cabeça considers that "a change of government always poses high risks that recent projects and concession contracts may be renegotiated", if not "cancelled altogether".
"These risks are increased by poor governance structures, institutional challenges, as well as polarised political environments," she points out.
And for the analyst "there are similar risks when a [power] holder makes way for an ally of the same party, especially in one-party states, where there are often major differences between factions within the ruling parties," she stresses, returning to the Angolan case.
The current Angolan president, after replacing José Eduardo dos Santos as Angola's head of state in 2017, "turned against members of the former leader's family, cancelling contracts concluded with companies linked to his daughter Isabel [dos Santos]," she recalls.
In this scenario, the analyst advises redoubled caution for investors.
Angola holds its fifth general elections on 24 August and the electoral campaign has eight competing political forces.

Agency : LUSA

Date : 2022-08-05 10:08:00


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