Johannesburg - Below are five big themes or events likely to
make waves in emerging and frontier sub-Saharan Africa during 2012:
Nigerian economic reforms
Nigerian President Goodluck Jonathan opened 2012 with a bold
statement of intent, scrapping popular but hugely wasteful fuel subsidies as
the first step in a long-awaited push to reform the economy of Africa's most
The unexpectedly harsh move, which at a stroke doubled the
price of fuel in the continent's biggest crude exporter, drew condemnation from
unions and opposition politicians and sparked protests in the commercial
Whether those demonstrations snowball into a significant
challenge to Jonathan's authority will be crucial in determining the future of
his wider reform push - most notably a shake-up of the woefully inept power
The subsidies' removal has the backing of Finance Minister
Ngozi Okonjo-Iweala and central bank governor Lamido Sanusi, who viewed them as
a drain on the public purse that merely encouraged waste and shoved billions of
dollars of government cash to a cartel of wealthy fuel importers.
However, it is far from certain that Nigeria's 150 million
people will swallow the increases, especially since many will remember military
ruler Sani Abacha, who attempted the same in the 1990s but was forced into an
embarrassing climb-down in the face of massive popular opposition.
An imminent showdown is brewing, with unions threatening a
national strike next week, including a shutdown of large parts of the oil
industry. The outcome is likely to have lasting repercussions.
Although it is unclear when they will be held, looming
presidential and parliamentary elections in Kenya are likely to form the
backdrop of all that happens in east Africa's biggest economy given the carnage
that followed voting in late 2007.
Uganda, Tanzania, Rwanda, Ethiopia and South Sudan will also
be watching closely for fear of a repeat of the ethnic clashes that killed 1
300 people and shut down regional trade routes for weeks.
A new constitution drawn up since then to try to prevent a
repeat stipulates that the election should be held on August 14 2012, but
cabinet is pushing for a December date, citing logistical hurdles.
As well as acting as a brake on investment, political
pressure for pacy economic growth may spill over into monetary policy - as
analysts suspected it did a year ago when the central bank failed to take
action against accelerating inflation.
Easing inflation and firmer currencies
Galloping inflation, most notably in east Africa, was one of
the big themes of 2011, especially when policymakers dithered in the face of
rising prices and currencies started to weaken sharply.
But that cycle appears to be over, pointing to more stable currencies
across the region and easing interest rates as the year progresses.
The central bank in Uganda, the regional economy where
prices rose first and fastest 12 months ago, called the top of the cycle this
week, saying inflation was on its way down after peaking in October at an
18-year high of 30%.
Kenyan inflation slowed in December for the first time since
October 2010, suggesting it too may have turned the corner - especially given
the shilling's 20% appreciation against the dollar since October 2011.
Of other African currencies, the rand is likely to remain
largely at the mercy of the eurozone's stranglehold over global investor
sentiment, while Nigeria's naira is likely to hold around its current levels if
oil prices and production stay on a broadly even keel.
South African economic policy
There are no public elections in Africa's biggest economy
this year, but politics are set to dominate the headlines as the ruling African
National Congress counts down to a December conference that will anoint its
next party leader.
The most likely outcome is for President Jacob Zuma to be
re-elected head of the former liberation movement, paving the way for a second
term in Pretoria in 2014.
However, the previous such ANC meeting in Polokwane in 2007
was a disorderly affair that ended with a successful party coup led by the
unions against then-president Thabo Mbeki.
With growth half of what it was five years ago, any
opposition to Zuma at the December meeting is likely to coalesce around his handling
of the economy.
Mining could well become a political football following
sustained calls from the ANC Youth League for nationalisation of the sector,
although broader investment and industrial policy and the central bank's
anti-inflation mandate could also get sucked in due to unemployment stuck at
Last year's 19% drop in the value of the rand has muted the
cries of unions demanding intervention to weaken the currency, although a
retracement this year could reignite the debate over the currency's free float.
Annual regional growth of 5% or more over the last decade
has made sub-Saharan Africa an attractive hunting ground for equity investors,
although a lack of liquidity and listed firms outside South Africa has hampered
stock market investment.
With its longer time frames and highly specific nature,
private equity faces no such constraints, and the signs are 2012 could be a big
year for the industry on the poorest continent, where growth is forecast at a
US firm Carlyle Group is set to open offices in Johannesburg
and Lagos and is expected to announce the closing of its first Africa fund,
while London-based Helios is likely to deploy capital after closing a $900m
Africa fund in June.
In addition, other avenues of financing for African
governments and companies are being squeezed as rich country budget problems
crimp development aid and nervous international banks continue to keep a tight
rein on credit, especially to "risky" projects - as nearly everything
in Africa is defined.
Most private equity interest is likely to be in the consumer
goods, telecommunications and financial services sectors, all of which benefit
directly from Africa's strong economic and population growth.