Cross-Border Threats Prove Risky for Investors in West Africa

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Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--West Africa is experiencing the highest regional increase in risks to investors, according to risk analysis firm Maplecroft (Bath, England) in its fifth annual "Global Risks Atlas." Key factors that the report identified include increasing security risks from militant Islamists, poor governance and a burgeoning cross-border illicit economy.

The 2013 edition of the atlas, which evaluates 179 countries across 36 risk issues, sees a deteriorating operating environment for foreign business and investors evolving across a large swathe of West Africa, with immediate implications for neighboring countries in North Africa.

The "high risk" countries of Cote d'Ivoire (in ninth place), Guinea (in 20th place), Guinea- Bissau (33), Mauritania (34), Sierra Leone (41), Gambia (49) and Togo (50) have increased significantly in risk. Mali (30) saw the largest increase in risk in the region, due to the ongoing conflict with Islamic militants in its northern areas and the instability of its government. Only Syria (10) and Libya (19) saw greater surges in risk.

Globally, countries classed in the "extreme risk" category are Somalia, the Democratic Republic of Congo, Sudan, Afghanistan, South Sudan and the Central African Republic.

The vast majority of West African nations have very low levels of resilience to global risks, leaving them particularly vulnerable to external shocks. With the exception of Ghana and Cape Verde, which are ranked as "medium risk" in the Global Risks Resilience Index, all other are classified as "high risk" apart from Cote d'Ivoire which is rated as "extreme risk."

The recent attack on the In Armenas gas plant in Algeria (55th and "high risk") illustrates that Mali, itself a victim of the conflict in Libya due to the influx of weapons and Islamic fighters in 2011, is now a cross-border risk, given its role as a base for attackers.

The global risk profile of West Africa's largest economy, Nigeria, has remained consistently high with the ranking of 15th. However, reports Maplecroft, its flourishing economy belies the rise of the militant Islamist group Boko Haram, which has contributed to a significant increase in the country's rating on their Security Risk Index, for which it is categorized "extreme risk."

In Maplecroft's Macroeconomic Risk Index, Poland (173), Philippines (171), Bangladesh (170), Colombia (161) and Russia (145) have all seen significant decreases in risk. South Korea is the best-performing country across the macroeconomic environment, economic diversification and fiscal risk. Both South Korea and Poland demonstrate high levels of resilience to global risks.

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