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This is not a good time to be a civil ruler in Africa. Gabon’s “déjà coup” is the eighth unconstitutional rise to power on the continent in just three years. A coup follows in Niger. Investors are nervously eyeing the resource-rich region. But political volatility does not necessarily lead to economic disruption.
It’s not hard to understand why companies are vigilant. Countries affected by a coup export important goods. Niger is a major uranium exporter. Gabon is the world’s fourth largest producer of manganese, which is used to make batteries. In addition, around 200,000 barrels of oil are produced daily. From a global perspective, that’s not much, but it’s important for the economy.
In addition, the instability is contagious. It emboldens opposition in countries where democratically elected governments have failed. Rwanda and Cameroon announced military reshuffles the day after the coup in Gabon.
In a power struggle, there is always a fear of business disruption. The French manganese mining group Eramet temporarily stopped production on Wednesday. A knee-jerk 16 percent drop in the stock was largely reversed on Thursday. Tullow, which produces 20 percent of its oil in Gabon, also saw a sharp drop.
Larger production losses are unlikely, however. Gabon’s economy is heavily dependent on natural resources. Oil alone accounted for about 40 percent of GDP in 2020. The newly installed military junta will want it to stay that way. The precedent is encouraging. Gold production in Mali increased by 4 percent last year.
Investors may worry that companies navigating choppy waters are sailing close to the wind. Glencore was sued Thursday over corruption scandals. The allegations are reminiscent of possible pitfalls.
But while the erosion of the democratic process in Africa is worrying, unelected governments are largely replacing underperforming rulers. These either failed to maintain security, seized much of their countries’ wealth, or clung to power with a tenuous claim to legitimacy. The palace’s revolving doors are unlikely to make any lasting waves.
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Source : www.ft.com