Operational risk in Africa

Mali is already yesterday's news. In the United States at least, the focus has shifted from the French intervention in Mali to Algeria, where a hostage crisis ended with the reported death of 90 people, including 58 foreigners, earlier this month. Many multinational companies, including Shell, Rio Tinto and Huawei are recalibrating their involvement in African countries.

The causes of the brutal and sudden acts of violence can be broadly divided into two categories: unstructured actions led by angry mobs, and methodical actions by groups that have an ideological agenda and aim for longer term goals. The National Movement for the Liberation of Azawad, supported by Ansar Dine in Mali, is now among the most recognizable names in this new constellation of non-state actors. But al-Qaida Islamic Maghreb in North Africa, Boko Haram in Nigeria, Al Shaabab in Somalia and M23 in the eastern part of the Democratic Republic of Congo are also important players.

It is, therefore, not surprising that trepidation is what many investors feel when they contemplate investing in the African market. So, is Africa just a very unstable powder keg? No, according to companies based in the golden triangle of East Africa where businesses in the oil sector are thriving. Safety conditions, while admittedly not perfect, are a far cry from what companies established in Mali are experiencing nowadays (or in Cote d'Ivoire recently).