Sub-Saharan Africa remains insulated from the world’s dominant austerity agenda. A prolonged supply overhang in the com- modities sector, leading to a decline in Chinese demand, will cause short-term damage, states global business risk consultancy firm Control Risks in its thirtieth yearly ‘RiskMap’ report, which was published in February.

The report points out that the region represents a global renewal opportunity to feed the structural rise in Asian demand.

“As the US pivots to Asia, China will pivot towards shielding its commodity supply lines. New oil and gas finds in East Africa mean that the landmass and sea lanes between the Gulf of Aden and the Mozambique Channel are poised to acquire new significance, as a source both of opportunity and vulner- ability,” says Control Risks Southern Africa MD David Butler.

The report highlights challenges in the mining industry, including the turmoil and unrest caused by violent strikes such as that which occurred at platinum miner Lonmin’s Marikina mine, which have generated a lot of talk in the past few months.

“These events have left a bad taste in some investors’ mouths – not only for those investors in the mining sector but also for those in other parts of the economy,” says Control Risks CEO Richard Flemming.

He adds that this year’s ‘RiskMap’ describes a world in which certainties are in short supply and leadership is more difficult to exercise.

The report highlights that the upside for Africans will be the increased scrutiny of the continent’s geopolitics.

Butler states that, in South Africa, the mining sector contributed roughly 8% of the country’s gross domestic product (GDP) in 2012, but it has had a disproportionate psychological impact on investor sentiment and public confidence in government’s ability to transform the economy.

“Fatal clashes between striking workers and police at Lonmin’s Marikana mine, in the North West, and the wildcat strikes that swept through the mining sector in mid- to late 2012, caused deep concern for investors, not only in the mining sector but also in other parts of the economy,” he explains.

Butler notes that the State’s role in the mining sector remains uncertain and until government adopts and implements a clear policy on this, investors will remain cautious.

“Clarity on this front is unlikely before at least 2014, with the African National Congress (ANC) distracted by the national elections this year. Meanwhile, government will attempt to monitor companies’ compliance with the Mining Charter more closely and will push for more beneficiation to accelerate broad-based black economic empowerment and reach the 2014 empowerment targets,” he notes.

Butler adds that the violence and subsequent international reaction during the wildcat strikes at Marikana not only alarmed investors but also caused many in the ANC to take note.

“Together with the impact of ris- ing social pressure and a vocal civil society, momentum is building, which could force government to take decisive action to tackle the challenges of domestic and inter- national investor concern,” he says.

The ‘RiskMap’ report states that South Africa’s forecast 2013 GDP growth rate will exceed that of Brazil, while Mozambique and Nigeria will outpace South Africa’s performance in 2013. South Africa’s more developed and diversified economy will, however, attract a much wider range of investors.

“Johannesburg will remain an attractive destination for human and financial capital and a springboard into the rest of the continent for the medium term,” Butler points out.

He adds that there is also a far greater number of Chinese investors in the South African marketplace than in previous years and, contrary to popular opinion, Chinese interest extends well beyond resource assets and currently includes construction and diversified industrial and financial services assets.

“The rise of Chinese investment and the potential the region holds as a global supplier and consumer will ensure that Africa’s importance will only increase in 2013.

As this takes place, the need for investors to structure their operations wisely increases and, correspondingly, the reputational and regulatory risks become more acute,” Butler says.

He states that, despite these challenges, opportunities still exist for investors who are able to map and manage the complexity and significant risks of a volatile world.

“A company’s or country’s abil- ity to exploit these opportunities increasingly depends on the abil- ity of leadership to embed resili- ence and suppleness in their organ- isations and States,” he concludes.