Should investors prepare for a second Arab Spring?

29 April 2019

Similarities between Sudan & Algeria’s security environments

North Africa has recently seen two popular uprisings against military-led regimes, in both Sudan and Algeria. Both led largely by young people eager for democratic reforms, the protests have been largely peaceful, but firm in their demands for new leadership, and a move away from military autocracy. 

These protests have elevated security risks for foreign businesses and investors, operating in both North African nations. This blog explores these risks, how they may impact the security environments of neighbouring countries, and how investors in this region can protect their operations. 

What has happened?

In Sudan, leader Omar Al-Bashir was ousted by the army on 11 April 2019, with a military council promising the Sudanese people elections in two years’ time.

However, protesters remain camped outside army headquarters in the capital, Khartoum, demanding a civilian administration, and a definitive dismantling of the old regime. Demonstrations have been spearheaded by the Sudanese Professionals’ Association (SPA).

Similarly, Algeria has seen demonstrations against the long-standing military rule of now ex-President Abdelaziz Bouteflika, as well as his remaining followers. This includes current interim President Abdelkader Bensalah who has promised new elections in July 2019.

However, the protesting youth have demanded the removal of all elements of the previous government, with demonstrations in Algiers calling for free and fair elections, which are not held by military institutions.

Security risks for investors in Sudan and Algeria 

In Sudan and Algeria, months of civil commotion has been driven by public dissatisfaction with both countries’ historically autocratic governments, combined with short-term economic issues such as food, housing and job shortages.

Although the protests themselves have been largely peaceful, crossfire between government forces and protesters has led to violence in the cities of both nations. 

Second Arab Spring article small page image

International businesses operating in Khartoum and Algiers in particular, may be impacted by unintentional damage to property, assets and personnel. Roadblocks caused by organised marches and protests have also been reported in both capital cities, and this will likely cause disruption to supply chains for foreign businesses, for as long as demonstrations continue.

Algeria and Sudan export a combined total of USD 13.7 billion worth of crude petroleum. Although petroleum products are processed elsewhere, both countries’ capital cities host critical export infrastructure.

In Sudan, protests are expected at Khartoum International Airport, while union activity may also disrupt port operations.

Therefore, oil and gas firms operating in these North African economies may experience operational disruption as a result of protests.

Risks are likely to remain elevated in the near term, as anti-government protests in both Sudan and Algeria are unlikely to subside. Protesters in both countries have not been placated by the removal of their respective heads of state, and will continue to demand wholesale political reform from interim governments.

There remains the risk of violence escalating in both countries, with the army likely to play a critical role. Major violence may erupt in either country if the army intervenes to suppress protests. Therefore, Sudan and Algeria’s high-risk security environments will likely remain elevated for the foreseeable future, posing risks which such investors should look to be insured against.

What can investors expect over the coming months?

The emergence of protest movements in both Algeria and Sudan in early 2019 may indicate the emergence of a second Arab Spring. Many other countries in North Africa have military-led governments which provoke popular political dissatisfaction.

Therefore, there is concern, that recent events in Algeria and Sudan will encourage demonstrations elsewhere on the continent, producing similar security risks.

208219 Sudan Algeria Graphic

This risk is exacerbated by economic weaknesses that in many countries have not materially improved since the first Arab Spring in 2011. Across the Arab world, youthful populations continue to grapple with elevated unemployment and inflation rates. Consumer goods and services shortages are common trends across the region.

April 2019 saw protests against Libyan military leader Khalifa Haftar’s recent offensive in civilian areas. Protesters have stated that they will return to Tripoli every week until Haftar withdraws, which increases the potential for popular protests to grow in size and strength against their government.

In Morocco, thousands of people joined protests in April 2019, demanding the release of activists from the northern Rif region. These marked the most significant protests in Morocco since 2011, when King Mohammed VI devolved some powers to parliament.

Often considered a success story of the Arab Spring, Tunisia also has presidential and parliamentary elections scheduled for late 2019, which could escalate into protests on the back of existing discontent with the government.

With unrest already widespread, Sudan and Algeria’s successful demonstrations may act as catalysts for further protests across North African countries, with similar governing bodies and political issues, in the coming year.

This will expose investors and businesses across the region to security risks in 2019. Firms should ensure that they have an adequate risk management strategy, protecting their people and assets in these locations.

Marsh JLT Specialty can assist clients with insurance solutions that cover strikes, riots and civil commotion, as well as the political risks, such as expropriation or currency inconvertibility, which may arise from government transitions.  

5 Key Takeaways

  • The security environments of Sudan and Algeria will remain unstable in the short-term outlook.
  • International businesses should look to insure themselves against the risk of damage to assets which could arise as collateral consequence of continued unrest.
  • Protests may cause disruption to the oil and gas industries in Algeria and Sudan, as export routes face disruption.
  • General unrest and recent events in Sudan and Algeria could catalyse protests across North Africa.
  • Therefore investors across the region should implement risk management strategies that address security risks.

Eleanor SmithTALK TO AN EXPERT

For further information, please contact Eleanor Smith, Senior Political Risk Analyst on +44 (0)121 514 8307

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