Terrorism wave now threatens to derail Africa’s hard-won stability and growth

Parts of the explosive that was found in the Kutus Catholic Church on December 20, 2015. Terrorism is undermining GDP growth and weighing down overall economic performance in the affected African countries. PHOTO | GEORGE MUNENE | NATION MEDIA GROUP

What you need to know:

  • Since 2009, Boko Haram alone has killed more than 10,000 people in Nigeria and has driven nearly a half-million from their homes.

  • The International Monetary Fund now includes terror threats among the major risks to the economic outlook in Nigeria, Tunisia, and Kenya.

  • Scaling up military missions is costly, and the unpredictability of terror strikes often requires extra spending on security.

Terrorism on the scale witnessed in Paris last month is nothing new in Africa.

In Nigeria, Cameroon, Chad, and Niger, the extremist group Boko Haram has inflicted thousands of casualties with suicide bombings and assaults on civilians.

In Kenya, the Somali group Al-Shabaab, has carried out two major attacks as well as many other smaller acts of terrorism.

In Tunisia and Mali, the Islamic State has targeted tourists. Terror, it seems, has become part of the new normal in Africa.

These attacks, and others, have cast a dark shadow across the continent’s long-awaited economic rise.

It is not difficult to see why. Terrorism risks derailing Africa’s economic and political development in six important ways.

HUMANITARIAN CATASTROPHE

For starters, there is the sheer scale of the humanitarian catastrophe.

Since 2009, Boko Haram alone has killed more than 10,000 people in Nigeria and has driven nearly a half-million from their homes.

Second, terrorism is undermining GDP growth and weighing down overall economic performance in the affected countries.

The International Monetary Fund now includes terror threats among the major risks to the economic outlook in Nigeria, Tunisia, and Kenya.

Economic indicators in these countries have been revised downwards after terrorist incidents.

Tunisia’s projected annual GDP growth for 2015 was cut from 3 per cent to 1 per cent.

The tourism sector is expected to experience a 45 per cent decline.

FISCAL PRESSURE

The damage to the sector — and, more broadly, to investor confidence — will trickle across Tunisia’s economy, pushing down output, fiscal revenue, and foreign reserves.

Third, the fight against terrorism is sucking up scarce financial resources.

Scaling up military missions is costly, and the unpredictability of terror strikes often requires extra spending on security, which sometimes causes governments to miss their fiscal targets.

After the Garissa University College attack, for example, the Kenyan government increased security-related spending by 0.3 per cent of GDP and provided additional financial assistance to the tourism sector.

In Central and West Africa, fiscal pressure has been especially intense.

In addition to the outlays required to equip the armed forces engaged against Boko Haram, Nigerian officials estimate that billions of dollars will be needed to rebuild ravaged infrastructure in the north. Similarly, Chad’s soldiers fought alongside French troops against terrorists in Mali and now they have coalesced with those of Nigeria and Cameroon in fighting Boko Haram.

In April, the country was granted $170 million in debt relief — the payoff for years of economic reform.

But now it is being forced to use part of its hard-won fiscal space to finance the fight against terrorism.

Fourth, the countries at risk are among the most promising frontier markets.

In Nigeria, a dynamic private sector has been diversifying an economy that has long been dominated by oil production.

Similarly, Kenya, home to a thriving ICT sector, is leading the world in the rollout and leveraging of mobile money.

If these economies are upset, they risk dragging down Africa’s overall performance.

Fifth, terrorism is undermining state building.

In most African countries, the military is weak and insufficiently equipped to handle this new threat, whereas terrorist groups are often well-funded and deploy committed combatants equipped with state-of-the-art weapons.

Finally, the risk that fighting terrorism poses to civil liberties is especially acute in Africa, where institution-building is still an ongoing process.

Some non-democratic regimes may take advantage of anti-terrorism policies to prey on their own people.

There is also a threat to the fabric of society if fear of Islamist extremism leads to stigmatisation or marginalisation of Muslims.

Most of the civil conflicts that held back Africa’s development for decades have finally come to an end.

However, terrorism risks undermining the continent’s hard-won stability and strong GDP growth.

Localised security issues are metastasising into macroeconomic threats.

This new danger to Africa must be addressed if the continent is to maintain its upward momentum.

Mr Alle is senior adviser to the International Monetary Fund’s executive director for Africa and former economic adviser to the minister of Economy and Finance of Côte d’Ivoire. Copyright: Project Syndicate, 2015.