Political & Country Risk – Why I Dont Listen To Credit Agencies!
Written By Tshepo Magagane
When someone talks about it, ask them a simple question “when last were you there, how long were you there for, what business are you doing there”!
I have this oversimplification of risk and totally mischaracterization!
If Friedland had listen to any of these “quantitative measures, he would not have build Kamoa in the DRC – which today employs 20,000 people and is expanding”
Spot, I can tell you we are working on:
1. USD330m Infra project
2. IPO of USD1bn Industrials
Oops in Africa (even in Kinshasa, you cant have an opinion about it until you live there – see the amount of USD that flows in that economy transaction-by-transaction; ie cash)
Will steal this excerpt:
[Roland Tatnall
Private Equity and Industry Executive, Energy and Infrastructure
The fallacy of single-point measures: Country Risk
Risk is specific to a project in the context of its location and is thus more nuanced than any single number can provide. To help visualise this I often use the example of Mozambique.
Mozambique is a Southern African country. South Africans have holiday homes on golden Indian Ocean beaches near the capital in its southern-most tip. The country has a very long coastline with poor overland infrastructure and the hinterland is underdeveloped.
The Cabo Delgado province is in the far north. It has large offshore gas reserves and has suffered from a protracted violent insurgency. At some 2700km by (poor) road from the capital, it is only realistically accessible to investors by air. The big risk for any project here is political: violence and threat to life and property.
Midway down the country, the Tete province is home to massive mineral resources. This region is also principally accessed by air. As the mining companies found to their cost at the height of the commodity super-cycle, the main risk to a bulk minerals project here is logistics: the viability of building overland transport links and a deepwater port.
Maputo, the beautiful capital set around a quintessential Indian Ocean bay in the far south experienced a real estate boom in the 2010s. Here, for many years, until recent election violence, the primary risk to real estate investment was commercial counterparty risk. It could be argued that that remains the case despite heightened (but localised) political risk.
So how do you represent all this in a single country risk metric? You cannot. Shortcuts and over-simplified analysis lead to poor decisions and either heightened risk or missed opportunities.]
