Geostrategic Analysis: May 2024 edition

South Africa's election will reshape the local political landscape

In the upcoming election on 29 May, the ruling African National Congress (ANC) is expected to lose its majority.¹² Opposition parties, varying from the leftist Economic Freedom Fighters to the right-leaning Democratic Alliance, could therefore gain influence in domestic policymaking and international affairs through coalition governments¹³, at both the national and local levels, potentially affecting areas such as economic policy and South Africa’s foreign relations.
 

The result of the upcoming elections could create uncertainty in sectors such as natural resources and energy, banking, and tourism, considering potential changes to the policy stance of government and to leadership roles at key government departments. Companies should also anticipate negative impacts to government services, particularly at a municipal level, such as road maintenance, and electricity and water supply disruptions. Further, if the ANC enters into coalition governments with populist parties, it could weaken investor sentiment, impacting capital flows and market stability.

For more information, contact Angelika Goliger

Armenia-Azerbaijan tensions to increase regional instability

On 5 April, the European Union (EU) pledged €270 million in grants to support Armenia’s economy as it pivots away from Russia, a historic ally.¹⁴ This comes after Russia was viewed as insufficiently supportive in Armenia’s confrontation with neighboring Azerbaijan, which is backed by Turkey. Azerbaijan and Armenia have reportedly started to demarcate the border, which may change the terms agreed in their 2020 peace agreement.¹⁵ In a sign of growing frustration with Armenia’s alignment with the West, Russia is withdrawing its peacekeeping troops from the disputed region. Despite the EU and the US continuing to encourage a diplomatic solution, there remains a risk of renewed conflict along the border.

The EU economic support package is focused on investments in energy infrastructure, including a new Black Sea electricity cable to supply clean energy to the EU. Meanwhile, Armenia has been enhancing its regulatory environment, including anti-corruption and rule-of-law reforms, to attract foreign investors. However, the looming threat of renewed conflict could undermine investor confidence in the region. Energy providers should thus evaluate market growth opportunities in the context of a heightened risk environment.
 

For more information, contact Barry Perkins

Vietnam leadership changes create policy and regulatory uncertainty

The resignation of Vietnam’s president in March – marking the second departure of the country’s head of state in less than two years – and of the legislative speaker in April, have created new political uncertainty in the country.¹⁶ These resignations are reportedly the result of ongoing anti-corruption efforts that seek to secure economic and social stability. Selection of a new president is complicated by a potential second anticipated leadership appointment to replace the Communist Party of Vietnam’s general secretary, whose term will expire in early 2026 but may end earlier due to speculation about his poor health. 

Ongoing leadership turnover creates political and policy uncertainty for companies as Vietnam continues to benefit from broader supply chain diversification trends. While Vietnam is expected to enhance its position as a critical global manufacturing destination, companies and investors should continue to adopt stronger political risk management capabilities and plan for regulatory uncertainty during what could be an extended period of political change. Stronger corporate governance requirements will also elevate reputation and compliance requirements for companies.