Western construction firms operating in developing nations face extra challenges

Contracting firms carrying out road construction works in developing nations can face extra challenges - Gordon Feller reports
Finance & Funding / January 9, 2024 3 minutes Read
By Gordon Feller
A lack of investment by South Africa’s energy firm Eskom in the network has resulted in frequent issues for customers, with power blackouts becoming more common – image © courtesy of Mike Woof

Western construction companies that focus on highways – in construction/engineering, in finance, and concessionaires - face many challenges as they expand into the Global South. Corruption, while certainly present in the developed west, is generally hidden in a more sophisticated manner than in developing nations. For construction companies looking to handle contracts in the developing world, this issue remains a challenge. Political instability also provides a threat for contractors working in certain parts of the world.

Recent coups in Gabon and Niger have reminded many executives who focus on Africa that the situation has not changed much: the whole continent is politically and militarily highly unstable. In the rest of West Africa, Ghana faces severe economic and financial challenges, indicated by 20-year high inflationary trends, local currency depreciation, dwindling foreign reserves, and rising debt vulnerabilities. These factors raise the prospect of political instability in the country.

Elsewhere, Nigeria’s president, Bola Tinubu, will face urgent challenges amid economic hardship, record unemployment and inflation, increasing social inequality, and diminishing oil revenues. These issues highlight the country’s precarious future and could lead to violence and security challenges unless addressed. Nigeria’s security environment is compounded by the risk of terrorism, which has a high score of 8.3, according to the independently published “World Risk Review” — a result surpassed only by a handful of territories globally.

The potential spillover of terrorism into West African countries poses a serious threat to the region’s political stability, particularly in Benin and Togo, but also in Côte d’Ivoire and Ghana, where jihadist groups are increasingly taking advantage of instability in Mali and Burkina Faso. While it has been reported that Burkina Faso is likely to engage Russia-backed Wagner private security contractors, it is doubtful this alliance will prevent jihadists from establishing greater de facto control of national territory.

Southern Africa is also likely to see continued social unrest. A growing protest movement in Angola — led mostly by young people, among whom unemployment is nearly 70% — aims to apply pressure on the recently re-elected People’s Movement for the Liberation of Angola (MPLA) government to hold municipal elections. The MPLA may continue to delay these elections, given the steep decline in support for the ruling party in national voting in August 2022. Elsewhere, amid an already fragile fundamentalist landscape, the restarting of gas infrastructure projects in Mozambique and international oil companies’ commitment to the country, could continue to be instability drivers.

In South Africa, hundreds of people took to the streets of Johannesburg in 2022 to protest a prolonged energy crisis that has caused record power cuts in the country. Scheduled blackouts, known as “load shedding,” have burdened South Africa for years as the state-owned energy firm Eskom, often the target of criminal gangs and corruption, has struggled to keep pace with growing demand and maintenance requirements of its ageing infrastructure. The outages reached new extremes in the past year and it is expected that they will continue to be a flashpoint.

The prosecution of former president Jacob Zuma and others implicated in the Zondo Commission Inquiry into Allegations of State Capture is another source of tension that may lead to occasional incidents of violent protest. Significant military deployments may prevent large-scale attacks on retail stores, yet the risk of disruptions to critical infrastructure — including ports, railways, and electricity grids — remains elevated. South Africa’s 7.5 rating for strikes, riots, and civil commotion in the “World Risk Review” indicates the prevalence of social instability that could undermine the country’s economic potential.

Africa’s drive to build new roads is often linked to rising global demand for minerals and ores. As a result, South Africa is a prime target of opportunity for many OECD-based companies. But mineral wealth is not a guarantor of positive outcomes for an investor or lender or infrastructure operator. Despite high prices and strong demand for critical minerals, many mineral-rich countries have elevated political risk, which can deter foreign direct investment.

Resource-rich countries could find themselves at the crossroads of geopolitical competition between China and Western countries. As of 2022, China accounts for more than 60% of the world’s rare earth mining, and it has made significant moves to ensure a primary position.

Around the world there are numerous operating mines and mineral processing facilities which are in jeopardy from rising terrorist threats. To better understand the full scope of the problem, consider the findings contained in the tenth edition of the “Global Terrorism Index”. GTI is a comprehensive annual summary of the key global trends and patterns in terrorism over the last decade. The calculation of the GTI score considers not only deaths but also incidents, hostages and injuries from terrorism, weighted over a five-year period.

The GTI is produced by the non-profit Institute for Economics & Peace (IEP) using data from TerrorismTracker and other sources. TerrorismTracker provides event records on terrorist attacks since 1 January 2007. The dataset contains almost 66,000 terrorist incidents for the period 2007-2022.

In 2022, deaths from terrorism fell by 9% to 6,701 deaths and is now 38% lower than at its peak in 2015. The fall in deaths was mirrored by a reduction in the number of incidents, with attacks declining by almost 28% from 5,463 in 2021 to 3,955 in 2022. However, if Afghanistan was removed from the index, terrorism deaths would have increased by 4%.

Afghanistan remained the country most impacted by terrorism for the fourth consecutive year, despite attacks and deaths falling by 75% and 58% respectively. The GTI does not include acts of state repression and violence by state actors and acts committed by the Taliban are no longer included in the scope of the report since the group took control of the government.

The deadliest terrorist groups in the world in 2022 were Islamic State (IS) and its affiliates, followed by al-Shabaab, Balochistan Liberation Army (BLA) and Jamaat Nusrat Al-Islam wal Muslimeen (JNIM).

IS remained the deadliest terror group globally for the eighth consecutive year, recording the most attacks and deaths of any group in 2022. Despite this, terrorism deaths attributed to IS and its affiliate groups, Islamic State - Khorasan Province (ISK), Islamic State - Sinai Province (ISS) and Islamic State West Africa (ISWA), declined by 16%. However, there has been a rapid increase in deaths attributed to unknown jihadists in the countries where ISWA operates, increasing by 17 times since 2017 to 1,766 terrorism deaths. Given the location, many of these are likely unclaimed attacks by ISWA. If most of the deaths caused by unknown jihadists were included as IS terrorism deaths, then the outcome would have been similar to 2021. There were 18 countries that experienced a death from terrorism caused by IS in 2022, a slight decrease from 20 countries the year prior.

After the substantial falls in terrorism between 2015 and 2019, improvements have plateaued in the last three years. Highlighting the point, the number of countries experiencing deaths has remained almost constant for the last three years, ranging from 43 in 2020 to 42 in 2022. This is down from the peak of 56 countries in 2015. The number of countries experiencing increases and decreases in terrorism deaths remained roughly the same in 2022, with 25 countries recording reductions, while another 24 countries recorded increases. Terrorism is dynamic and, although the overall change in the last three years has been minimal, there have been sharp rises and falls in terrorism in many countries during this period, notably Niger, Myanmar and Iraq.

Terrorist attacks became deadlier in 2022, killing on average 1.7 people/attack in 2022 compared to 1.3 deaths/attack in 2021. This is the first increase in lethality rate in five years.

Violent conflict remains the primary driver of terrorism, with over 88 percent of attacks and 98% of terrorism deaths in 2022 taking place in countries in conflict. All 10 countries most impacted by terrorism in 2022 were also involved in an armed conflict. Attacks in countries involved in conflict are seven times deadlier than attacks in peaceful countries.

The Sahel region in sub-Saharan Africa is now the epicenter of terrorism, with the Sahel accounting for more terrorism deaths in 2022 than both South Asia and the Middle East and North Africa (MENA) combined. Deaths in the Sahel constituted 43% of the global total in 2022, compared to just 1% in 2007. Of particular concern are two countries, Burkina Faso and Mali, which accounted for 73% of terrorism deaths in the Sahel in 2022 and 52% of all deaths from terrorism in sub-Saharan Africa. Both countries recorded substantial increases in terrorism, with deaths in Burkina Faso increasing by 50% to 1,135 and in Mali by 56% to 944. Attacks in these countries are also becoming deadlier, with the number of people killed per attack increasing by 48% from 2021. Most attacks in these countries are attributed to unknown jihadists though both IS and JNIM operate in these countries. The escalation in violence in Burkina Faso has also spread to neighboring countries, with Togo and Benin recording their worst GTI scores on record.

The increase in terrorism in the Sahel has been dramatic, rising by over 2,000% in the last 15 years. The political situation in the Sahel compounds this increase, with six coup attempts since 2021, of which four were successful. The underlying drivers are complex and systemic including poor water utilisation, lack of food, ethnic polarisation, strong population growth, external interventions, geopolitical competition, pastoral conflict, the growth of transnational Salafi-Islam ideology and weak governments. Most of the terrorist activity occurs along borders where government control is weakest. Significantly, of the 830 million people facing food insecurity globally, 58% live in the 20 countries most affected by terrorism. Adding to the complexity, many criminal organisations increasingly represent themselves as Islamic insurgents, which partly accounts for attacks attributed to unknown jihadists.

North America had the largest regional improvement in score, while sub-Saharan Africa recorded the largest deterioration. North America consists of two countries, the US and Canada, with neither country having a high score; however, the region is the only region where no countries have a GTI score of zero.

Sub-Saharan Africa recorded the largest increase in terrorism deaths, rising by 8%. Shockingly 60%, or 4,023, of all terrorism deaths globally occurred in sub-Saharan Africa. Four of the 10 countries with the largest deteriorations in GTI score are located in sub-Saharan Africa: Togo, Djibouti, Central African Republic and Benin. Terrorism deaths in Sub-Saharan Africa increased by 8%, reversing the small improvement recorded in 2021.

The MENA region recorded only 791 deaths in 2022, a fall of 32% and the lowest number in the region since 2013. Attacks almost halved in the last year, from 1,331 in 2021 to 695 in 2022. Underscoring the changing dynamics in terrorism, the region has dropped from 57% of global terrorism deaths in 2016 to just 12% in 2022. There has also been a substantial drop in suicide bombings in MENA. In 2016, suicide bombings resulted in 1,947 deaths; while in 2022, MENA recorded only six suicide bombings that killed eight people.

South Asia remains the region with the worst average GTI score in 2022. The region recorded 1,354 deaths from terrorism in 2022, a decrease of 30% when compared to the previous year; however, if the improvement in Afghanistan was excluded, then terrorism deaths would have increased by 71%. In Afghanistan, both the Khorasan chapter of IS and the emerging National Resistance Front (NRF) pose a serious threat. Afghanistan and Pakistan remain amongst the ten countries most affected by terrorism in 2022, with deaths in Pakistan rising significantly to 643, a 120% increase from 292 deaths in 2021. The BLA were responsible for a third of these deaths in Pakistan, a nine-fold increase from the prior year, making it the fastest growing terrorist group in the world.

The total number of attacks In the West continues to fall, with successive falls each year since 2017. Forty attacks were recorded in 2022, a decrease of 27 percent when compared to the 55 attacks in 2021. However, the number of deaths more than doubled, albeit from a low base; from nine deaths in 2021 to 19 in 2022, with 11 of these occurring in the US. This was the first increase in terrorism deaths in the West since 2019. In Europe, Islamist extremists carried out two attacks in 2022. Attacks in the US remained low, with only eight attacks recorded in 2022. None were attributed to any known terrorist group. The UK recorded only four attacks and no deaths this year, the first year since 2014 that no deaths have been recorded; while Germany recorded the lowest number of attacks since 2015.

Ideologically motivated terrorism continues to be the most common type of terrorism in the West, with religiously - motivated terrorism declining by 95% since its peak in 2016. All 14 ideologically-motivated deaths can be attributed to far-right terrorism.