On Africa’s Frontier, Investment May Follow Sustained Security

Courtesy of STRATFOR (subscription required), an interesting analysis of some frontier markets in Africa:


Investors may grow more confident about placing their money in some African countries long thought prohibitively risky. In Sierra Leone, a country wrecked by nearly a decade of civil war, international peacekeeping efforts are no longer necessary. Since 2005, the U.N. mission in the country has changed from one of security operations to ones that promote socioeconomic and political stability. Subsequently, security in Freetown improved enough to attract preliminary and exploratory investment interest. This kind of interest will only grow if Sierra Leone continues to develop socioeconomically.

But Sierra Leone is not the only African country on the frontier of newfound investment. Angola, Zimbabwe and some areas of Somalia could also present promising opportunities to investors, even if security and stability concerns remain. 


U.N. Secretary General Ban Ki Moon traveled to Sierra Leone on March 5 to oversee the closure of the United Nations Integrated Peacebuilding Office there. The closure marked an end to a mission that has essentially been in place since 1999, when Sierra Leone was in the throes of civil war that necessitated some 18,000 U.N. personnel in the country — one of the organization’s largest missions to date. Between the early 1990s and the early 2000s, an estimated 300,000 people were killed in the war, which could be seen as just one theater in a broader civil conflict that involved neighboring Liberia. In turn, the wars in Sierra Leone and Liberia also gave rise to conflict in other West African countries, including Ivory Coast and Guinea. U.N. peacekeepers remain in Liberia and Ivory Coast to this day.  

The lingering U.N. missions elsewhere in Africa make the March 5 closure somewhat of a rarity, which speaks to the progress that has been made in Sierra Leone. However, there are still plenty of opportunities for improvement. Roughly 70 percent of the population is considered impoverished, there are more than 800,000 unemployed youths, and there are still abundant, easy-to-mine alluvial diamonds. All of these problems were exploited by outsiders during the civil war.

But these outsiders are no longer encroaching on Sierra Leone as they once were. Liberia, Guinea and Ivory Coast — not to mention countries farther afield like Burkina Faso and Libya — are preoccupied with their own domestic stability concerns. Gone are leaders such as Charles Taylor and Moammar Gadhafi, who tried to achieve greater regional prominence through the Sierra Leone conflict. In fact, Sierra Leone has not experienced notable clashes in a decade, and all three election cycles since the end of the civil war have been relatively peaceful.

Freetown has parlayed its relative peace into bids for foreign investment. There are prospective offshore oil and natural gas opportunities. Most international companies have focused on other West African nations that have proven production, including Nigeria, Equatorial Guinea, Gabon, Cameroon and the Republic of the Congo, but as private equity capital and offshore drilling technologies become more available, companies are starting to look elsewhere. Though they may not see quite as much production as they would around Nigeria, Africa’s most productive oil state, the demand for additional real estate will compel investors to experiment with countries such as Sierra Leone, particularly as security improves and as the countries stabilize politically.

Other Opportunities


Other African countries present similar opportunities. Angola is one such country. Its civil war lasted from 1975 to 2002, during which time its oil production plateaued at around 750,000 barrels per day. After the war ended, foreign investment began to flourish, especially in the energy sector. Oil production quickly expanded, and the country now produces approximately 1.7 million barrels of crude oil per day. Angola is also extensively developing infrastructure to support onshore oil and natural gas production as well as non-energy extractive industries. Roads, railways and power plants are being built throughout the country to facilitate mining and agriculture development. Moreover, the country has earned enough revenue that it is now able to allocate money in its own sovereign wealth fund, which could support government economic interests at home and abroad.


Many believe that Somalia is also among the African countries on the frontier of newfound investment. The country is beset by an Islamist insurgency led by militant group al Shabaab. The Somali government controls little actual territory apart from neighborhoods in the country’s capital, Mogadishu. But Somalia benefits from the presence of approximately 22,000 peacekeeping personnel under a joint United Nations and African Union mandate. The peacekeepers have recovered considerable territory from al Shabaab and have wrested a lot of control the Islamist militants once held. No one group fully controls Somali territory, but peacekeepers now control most urban areas, forcing al Shabaab to adopt more classic insurgency tactics, in which it ambushes conventional military targets before retreating to a safe zone.

Though the country is not entirely immune to al Shabaab operations, Puntland, one Somali region in which oil and natural gas is being explored, has comparatively little al Shabaab activity. However, the offshore environment may have been sufficiently stabilized enough to encourage more investment. Somali piracy has decreased substantially; there have been no reported successful hijacks since mid-2013. Al Shabaab itself has never operated offshore (although it tried to cooperate with piracy groups north of Mogadishu to get a cut of the ransom revenues and possibly help smuggle supplies into the country).

Questions remain about Mogadishu’s ability to govern the country effectively, but it can provide or permit sufficient security and a legal operating environment. As oil companies sign deals with regional governments like Puntland or look to areas where the al Shabaab threat is less pronounced — and as oil and natural gas exploration in East Africa approaches Somalia — they may decide Somalia is worth the time and money.


Zimbabwe, another potentially attractive opportunity for investors, was once a relatively developed country, but policies enacted by President Robert Mugabe have devastated the economy. Foreign business ownership is severely restricted.

The investment environment of Zimbabwe may change, though no change can be expected until Mugabe leaves office. So far, there are no signs that he will leave office voluntarily, but because he is 90 years old and his health is declining, his departure could soon be in the offing. The ruling Zimbabwe African National Union-Patriotic Front is struggling to determine who will succeed him as factions led by Vice President Joice Mujuru and Justice Minister Emmerson Mnangagwa compete for primacy.

Once Mugabe is no longer president, the domestic pressure could create change in the Zimbabwean economy. The country is flush with mineral resources, including platinum, diamonds, gold and coal, and has long been the breadbasket of southern Africa. It also produces enough tobacco to export to the global market.

Whoever succeeds Mugabe will have to manage Zimbabwe African National Union-Patriotic Front carefully so that the winning faction does not lose ground to its competitors. It will also have to manage what will likely be widespread popular pressure to make a break with the past and institute reformist political and economic policies in order to improve the national economy.

This entry was posted on Saturday, March 8th, 2014 at 11:52 am and is filed under Uncategorized.  You can follow any responses to this entry through the RSS 2.0 feed.  Both comments and pings are currently closed. 

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Wildcats & Black Sheep is a personal interest blog dedicated to the identification and evaluation of maverick investment opportunities arising in frontier - and, what some may consider to be, “rogue” or “black sheep” - markets around the world.

Focusing primarily on The New Seven Sisters - the largely state owned petroleum companies from the emerging world that have become key players in the oil & gas industry as identified by Carola Hoyos, Chief Energy Correspondent for The Financial Times - but spanning other nascent opportunities around the globe that may hold potential in the years ahead, Wildcats & Black Sheep is a place for the adventurous to contemplate & evaluate the emerging markets of tomorrow.