Lawrence Nazare
By Lawrence Nazare
Listed among four key geopolitical risks, which present grave medium to long term consequences, that are likely to continue into 2015 is the escalating extremist spawned terror crisis threatening security across the Middle East, parts of Asia, North Africa, East African the Sahel and West Africa and, increasingly major cities across the globe.
Other likely geopolitical risks of concern include “Right wing Nationalism threatening the welfare of immigrants in most developed nations and renewing racial and sectarian divisions; thirdly a ‘New Cold War’ precipitated by events in the Ukraine resulting in a new bipolar schism with no fundamental ideological base; and fourthly territorial claims motivated by resource prospects, for example in the South China Sea and Antarctica that are threatening future global peace.
A major possible risk in 2015 is another global meltdown from the oil price war going on. If OPEC maintains production, oil prices will fall below the economic production price for US oil franking and may lead to another US recession with the consequent ripple effect on the rest of the world.
In Africa
Changes in the global economy in 2015 are expected to come from the slowdown in China and the drastic change in OPEC, particularly Saudi views on crude oil prices that will negatively impact established oil exporting countries in Africa and all the new and other expectant countries looking forward to a hydro-carbon inspired boom. Termination of 'quantitative easing' has resulted in flight of capital from emerging and developing countries' capital markets.
At risk in 2015 are sectors requiring intensive capital, for example, mining and hydro-carbons facing severe capital constraints and revenue reduction as well as infrastructure, power and transportation sectors facing stagnation due to slowing investment.
Social unrests in restive disadvantaged populations, particularly the urban youth, due to Africa's GDP growth story not permeating to lower strata.
Overcapacity due to influx of 'naïve' foreign capacity in Africa causing melt down in insurance pricing particularly for 'peak' exposures.
Tourism in Africa
The tourism sector faces the risk of further slowdown due to increased extremist activities and bad image resultant from Ebola crisis.
Commodity Prices
Lower commodity prices leading to GDP growth stagnation, currency pressures, high inflation and balance of payments constraints are economic risks that will impact Africa’s fastest growing regions in 2015. The slowdown of African economies due to depressed commodity prices, particularly oil leading to capital flight, fiscal pressures on governments, negatively impact all sectors particularly insurance.
Continental Reinsurance
Opportunities in Africa
Opportunities on the African continent are expected to come from the consumer driven sectors like such as FMCGs, real estate, telecoms, and health seeing sustained expansion due to Africa’s expanding middle class.
Economic risks that could potentially face Africa's fastest growing regions in 2015
The lack of fiscal space for governments and reduced budgetary commitments to social services and infrastructure and relapse of fragile economies into extreme poverty are economic risks that could potentially face Africa's fastest growing regions in 2015.
* Mr Lawrence Nazare is the Executive Director of Continental Reinsurance - the largest privately owned pan-African reinsurance company outside of South Africa. Continental Reinsurance operates in more than 46 African countries.
Nazare is a prominent figure of the African insurance industry having held several posts including being the current Chairman of the Organization of Eastern and Southern African Insurers, OESAI. He holds a post-graduate Law degree from the University of Zimbabwe and is an admitted Legal Practitioner. He is an Associate In Reinsurance (Are) of the American Insurance Institute.