Political risk in emerging markets, according to Control Risks in its annual report, Risk Map 2008, of political and security risks around the world, is strong enough to pose a threat to investment. Fifty seven percent of emerging markets showed at least medium political risk while countries like Zimbabwe, North Korea and Somalia showed extreme political risk.
“Trends towards economic nationalism, a retreat to authoritarianism and reform fatigue are prompting concerns that politics will increasingly impinge on investment decisions,” the consultancy said.
Control Risks said that in countries showing medium political risk there is a risk for business of exposure to some or all of corruption, hostile lobby groups, absence of adequate legal guarantees, restrictions on imports and exports, weak political institutions and “capricious” policy-making.
Control Risks found that sixty percent of emerging market countries also have at least medium security risk. It names nine countries with extreme security risk to assets or staff where it advises “foreign companies must strongly consider withdrawal.”
The study claims that Zimbabwe, Nigeria, Somalia, Democratic Republic of Congo (DRC) and Niger will remain prone to conflict and instability, while reformer such as Ghana and Botswana will continue their progress. It claims all eyes will be on South Africa as the African National Congress (ANC) moves to adopt a new leader in December and a presidential candidate in 2008. It will seek to examine the prospect of “policy drift”, and critically contrastring the broader outlook for the once-divided nation with that of Zimbabwe.
The study said 2008 will re-affirm that, while far from a negligible concern, perceptions of political risk on the continent of Africa particularly are frequently exaggerated.Â
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