Risk Management
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Ed Butler and Ollie Sheinwald at Salamanca look at the overall security context in Sub Saharan Africa and discuss the operational and security implications.
Sub Saharan Africa - a diverse and challenging
operating environment
The need for international companies to really understand political dynamics in potential new markets in SSA has never been greater.
S
UB SAHARAN AFRICA (SSA) offers huge opportunities for international oil companies (IOCs), but it remains a diverse and challenging operating environment. The onshore risks associated with operating in SSA are relatively fluid since local and regional politics vary enormously across the region. But certain trends, namely the persistence of international tensions, the development of transnational extremism and the continuing uncertainty around elections, demand intelligencedriven responses from IOCs which are similar across continental SSA.
Local engagement At the local level, IOCs can face challenges thrown up by their own presence in a country. Recent discoveries of oil in Uganda and Kenya have inspired huge local optimism, but the region will likely experience many of the negative effects of oil production that have affected West Africa. While difficult to forecast, the increase in upstream oil activity in East Africa is likely to have widespread social and political implications. The first signs of this are already being felt in Tanzania, where government decisions over where to allocate oil and gas investment have inspired popular protests in the south of the country. Managing relations with local groups requires an in-depth understanding of local dynamics and constant interaction with local stakeholders. In the short term, developing good community and labour relations through corporate social
14 Oil Review Africa Issue Four 2013
responsibility programmes and civil society engagement are recommended measures. They are a key part of creating solutions which are light-footed and affordable. In the longer term, monitoring local political dynamics through political risk reporting can help IOCs assess how their operating environment is changing and react to threats as they emerge. Wherever they are active on the continent, IOCs operate in the context of transnational threats, national politics and local ethnic and civic dynamics. The core of risk management strategy is developing and nurturing relationships with local partners, whether these are state security structures, local business partners or civil society groups. These relationships are most effective when they are informed by local intelligence, either through stakeholder mapping or political risk reporting. Such tools can help IOCs understand the connections, reputations and motives of potential local partners, whether they are engaging a security partner or building a school.
Political risk and domestic dynamics The need for international companies to really understand political dynamics in potential new markets in SSA has never been greater. In the last year, there have been coups in Guinea Bissau and the Central African Republic. Unrest surrounding recent elections in Kenya and Liberia serves as a reminder that even more stable states can be shaken by internal tensions. Monitoring national political dynamics around flashpoints such as
Managing relations with local groups requires an in-depth understanding of local dynamics and constant interaction with local stakeholders. elections, referendums and prominent political trials continues to be important for anticipating instability. Companies operating in stable states with wellentrenched regimes and power structures face a subtle set of challenges. Negotiating the business landscape in countries such as Angola, Nigeria and Equatorial Guinea requires an appreciation of the complex links between politics, business communities and international companies. In jurisdictions with poor transparency, enhanced due diligence can allow IOCs to build a picture of a prospective partner’s reputation and business practices. Stakeholder mapping helps companies assess if a local partner is linked to politicians or other public figures. Together, these allow IOCs to develop relationships which facilitate business in a difficult environment, while maintaining high standards of corporate governance.
Understand inter-state dynamics Despite the decline in large-scale international and civil wars, inter-state tensions are still big drivers of conflict on the continent. Poor bilateral relations fuel conflict between non-state actors, which pose specific local threats to IOC operations and hamper state
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