Donald Rumsfeld famously talked about known knowns (things we know we know), known unknowns (things we know we don’t know) and unknown unknowns (things we don’t know [yet] we don’t know). There are also unknown knowns (things we do know about but choose to ignore).
When we look at risks – and opportunities – across Africa, there are things that fit into each of those categories. It is easy to look at the potential of more than 50 countries across the continent and subscribe to the narrative of ‘Africa Rising’ but pass over the risks, as Chinese investors and African governments alike have come to realise – the former having become far more risk conscious and the latter more conscious of what the price of that investment is.
The outbreak of ebola, in addition to being a terrible and preventable human tragedy, brings risk assessment sharply to the foreground. Most risk models are poor at dealing with events and even poorer dealing with ones that have catastrophic economic consequences. For Liberia, Guinea and Sierra Leone particularly, ebola threatens to derail fragile economic progress – keeping farmers from their fields, workers from their factories, consumers from their markets and visitors away from the region as a whole.
Was ebola a known known, a known unknown or an unknown known? Since the mid seventies there have been more than twenty outbreaks of various ebolaviruses, but none as severe as the current one. It is easier to assess the response to ebola: it is a foreseeable risk, a known known, that low income countries like Liberia, Guinea and Sierra Leone will struggle to contain and manage infectious diseases that burn as hot as ebola does. But it doesn’t neatly fit a risk model: analysts struggle to incorporate something that has been manageable in the past but when it reoccurs can be anything from inconsequential to catastrophic.
The issue of risk more widely is inescapable across Africa and Africa’s primarily low income countries are particularly susceptible to shocks. Only two countries – Mauritius and Botswana – properly qualify as lower risk. The rest of the countries vary only by the severity and type of risk to which they are exposed. The opportunities that exist – and there are many – do so amongst considerable political, social, economic, foreign exchange, market and operational risks. Operational risks are particularly challenging in the consumer economy because of the sheer number of obstacles – although none are insurmountable they collectively can take an axe to profit forecasts and divert a disproportionate amount of management time.
A major risk – at least when it comes to due diligence – is the paucity of quality data upon which to make market assessments. This is an area we’re doing more work on, and where we think we can shine some light on. We don’t have a crystal ball, unfortunately, but we are building a more complete picture of market data across Africa that allows us to identify patterns, gaps and inconstancies much more easily – a considerable asset where even core data such as GDP can be off by 50%.
