Control Risks, a specialist global risk consultancy has outlined the top 5 risks for businesses in 2021, among which are prolonged threats of the COVID-19 pandemic, emerging digital threats, climate change and the US China relationship.
According to Control Risks, underpinning these risks is the danger of missing the rebound in a year of multi-speed recovery which is a top risk for businesses in 2021.
“There’s no doubt that businesses will continue to face considerable disruption from the COVID-19 pandemic, but we believe that the opportunities are real and exciting for many companies in 2021,” said Nick Allan, CEO of Control Risks.
Based on their risk analysis, all top 5 global risks are going to play out in Africa but in diverse ways. In some areas, the continent presents a positive break from the more negative global trends, such as in the regional cooperation shown by the continent in its response to the COVID-19 pandemic and the recent launch of the African Continental Free Trade Area (ACFTA).
Overall, however, 2021 will be a tough year for the continent that is struggling to recover from COVID-19 as fast as much of the rest of the world. Despite many significant opportunities for investors, the markets they are investing in will be ones characterized by significant operational and political uncertainty.
Accordingly, the investors that will achieve success in 2021 are those that understand that Africa’s post-pandemic landscape will be tangibly changed from what came before, presenting different challenges and new opportunities.
A world with long COVID
According to Control Risks, 2021 will be a year of uneven recovery as vaccine rollouts create a world of haves and have-nots, with traces of the Covid-19 virus going to stay with countries who will be among the last to receive vaccines. Much of Africa, unfortunately, will be in the have-not category and companies will face prolonged operational uncertainty as localized restrictions are occasionally imposed in response to virus spikes.
Africa’s economic recovery will also be more gradual, as governments with limited fiscal space cannot engage in sustained stimulus spending and must instead rely on under-developed private sectors to drive their recoveries.
US-China: Stabilization without Normalization
While 2021 should experience quite some stabilization in the US-China relationship, the straining of the international rules-based system seen over the past few years will not go into full reverse. Competition rather than cooperation will remain the norm in international relations.
In this regard at least, Africa represents a welcome break from global trends, due to the commencement of the AfCFTA on January 1, 2021 and although full implementation of the continental free trade area will be slow, the fact that Africa is moving in that direction should make the continent attractive to potential investors.
Go green or go bust
Furthermore, a turning point is in view regards the relationship between businesses and climate change in 2021. No organization can now afford not to take a stance since the environment is a critical aspect in a broader area of the Economic, Social and Corporate Governance agenda (ESG).
Although no African country apart from South Africa has made a net-zero pledge to date – without special funding, governments do not view it as a priority, the continent nonetheless has huge renewable energy potential.
Renewable energy projects connected to microgrids make sense in a continent of small population centres spread over huge areas, and the recent liberalization of energy markets in many countries has opened up multiple opportunities for private-sector investors. Without government backing, however, investors may ignore these opportunities for the subsidies and support on offer elsewhere.
Digital acceleration hits emerging threats
The remarkable increase in connectivity across Africa – in mobile phone penetration, internet penetration, social media use and data traffic flows, has opened up a vast array of new opportunities. This is evidenced by the rapid growth in the African tech sector over the past few years.
But this connectivity also brings risks. Cybercrime has boomed across Africa, from simple scams to sophisticated attacks on critical infrastructure. Companies in Africa, just like the rest of the world, will have to balance the drive for technological innovation with security, integrity and resilience challenges.
Missing the Rebound
This year will see strong GDP growth in multiple markets, the roll-out of vaccines for a world poised to start normal life again. While progress will be faltering, an uplift is coming – do not miss the rebound.
If 2020 was about survival for many companies, 2021 is the time to focus on opportunity. Under the challenges of COVID-19 many companies have bended, not broken. Through innovation, rapid technology adoption and streamlining, they have emerged stronger, while weaker competitors have fallen.
Those companies that turn the efficiency gains of 2020 into productivity gains and continue to accurately assess trends and show flexibility in adapting their operations will benefit from the coming surge in demand.
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