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Namibia’s Investor Friendly Policies; Somalia’s August Presidential Elections

Namibia’s national elections in 2014 pose little threat to mining and energy investors. Somalia’s presidential elections may increase support for al-Shabaab.
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UK Foreign Office Minister Henry Bellingham (left) meeting Hage Geingob (right), Trade and Industry Minister of Namibia in London in 2011. Photograph by Foreign and Commonwealth Office.

Namibia: likely continuity of policy following the 2014 elections will mitigate risks to the mining and energy sectors

The ruling South West Africa People's Organisation (SWAPO) is due to hold its elective congress by the end of 2012, at which point it will elect a new leader to head the party in national elections in 2014. The unifying influence of popular former president Sam Nujoma is likely to lead the party to another landslide victory in 2014. Our sources state that Nujoma favours current Trade and Industry minister Hage Geingob to succeed outgoing president, Hifikepunye Pohamba, possibly already by mid-2013. Current Justice Minister Pendukeni Iivula-Ithana is likely to succeed if Geingob refuses the presidency, which is less likely.

However, whether Geingob or Iivula-Ithana becomes president, the new government is unlikely to steer away from investor friendly policies in the mining and nascent energy sector. Nujoma's significant influence over the government and SWAPO is likely to ensure continuity of policy within these sectors. Large foreign miners, including De Beers, Rio Tinto, AngloGold Ashanti, Paladin Resources and Extract Resources, are well-placed politically. The relatively short lifespan of a number of strategic projects in uranium and diamond mining also mitigates the risk of state intervention. The government has already watered down planned revisions to the mining code that would have forced existing miners into joint ventures with the state-owned mining company. Planned tax increases for the mining sector have been put on hold. The most significant energy project is the Kudu natural gas field, in which UK-based Tullow Oil holds a minority stake.

However, the growing influence of business moguls close to Nujoma, such as Aaron Mushimba, heightens the risk of unfair competition and expropriation outside the mining and energy sectors. In June 2012, the government announced it would take a 30% stake in the country's largest meat processing co-operative, Meatco Namibia, without offering compensation. Local sources say the government suddenly expressed renewed interest in Meatco when the company returned to profitability in 2012, and had the likely intention of selling off shares to politically-favoured businesses. Risks are also likely to increase in other sectors considered strategic, such as banking, telecommunications and construction, which would especially increase risks to South African firms, such as Standard Bank, MTN and Vodacom.

Somalia: President Ahmed's re-election would likely shift support to al-Shabaab, while his loss would raise risks for Turkish contracts

On August 1, 2012, the constitution was passed, paving the way for August presidential elections. President Sharif Ahmed is running for a second term despite calls for his retirement. His main rival is reformist former cabinet member Abdirahman Warsame, who hails from Ahmed's Hawiye clan. If Warsame wins the election, he is likely to review all public contracts increasing the risk of contract cancellations, particularly for Turkish, Emirati and Qatari companies in the logistics, construction and security sectors that Ahmed is considered to have treated preferentially. The re-election of Ahmed would probably be interpreted as a product of foreign intervention and electoral fraud and would likely increase support for al-Shabaab, undermining military gains in the south.

The 825-member National Constituent Assembly (NCA) ratified the constitution before the August 2 deadline. Clan leaders will select 225 Parliament members, who are then responsible for electing the president by August 20. The most important factors that will likely affect the election are clan affiliation, funding and foreign financial and diplomatic support. Members of Parliament will be selected on a clan-based '4.5 formula', which gives a full vote to the four largest clans - Darood, Hawiye, Dir and Rahaweyn - and half a vote to smaller/coalition clans. Presidents have traditionally come from one of the four major clans with the backing of at least one other.

On July 31, Warsame and seven other presidential hopefuls announced that they would field one candidate, after many of them had accused the government of interfering in the MP selection process. These accusations were echoed by UN official Augustine Mahiga. President Ahmed is likely to secure the support of the influential secularist Speaker of Parliament Sharif Hassan, key clan leaders and followers of his Ahlu Sheikh brotherhood. Hassan will likely provide Rahaweyn votes in exchange for cabinet positions. EA sources in Somalia also report that Ahmed has tried to garner support from Ethiopia and Kenya with his backing for their campaigns against al-Shabaab and from Turkey through preferential contracts.

Ahmed is seen as corrupt and susceptible to foreign manipulation, and growing discontent raises the risk that al-Shabaab will benefit from increased popular support if he is re-elected. Grassroots support would facilitate greater access to major cities, exposing foreign, government and strategic assets, including commercial businesses and airports, to severe risks of IED and rifle attack. If Warsame were to win, he would likely scrutinise contracts awarded to perceived Ahmed allies, with high risks of revision.

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