KARABO MOKGONYANA: Economic impact of coups d’état in West and Central Africa

In the past couple of months West and Central Africa have seen a spate of military and electoral coups that are mainly characterised by leaders justifying their seizure of power by pointing to poor governance, high levels of corruption and deteriorating security. The region has now seen about eight coups since 2020 in countries including Niger, Mali, Guinea, Chad, Burkina Faso and most recently Gabon. This trend threatens to reverse or put at risk economic development on the continent. 

A common feature of coups in West and Central Africa is that transport and internet services have become disrupted. The participation of port workers, truck drivers and officers from various government agencies in these countries has and will have a crippling effect on international trade. The military governments in this region impose periodic shutdowns and limits on internet connections to try to stifle political opposition, which has led to operational difficulties for businesses.

Internet shutdowns are extremely disruptive to economic activity because they halt e-commerce, generate losses in time-sensitive transactions, increase unemployment, interrupt business-customer communications, and create financial and reputational risks for companies. For example, in 2020 Chad lost $23.1m by closing down the internet and Burkina Faso lost about $35.9m in 2021 due to an eight-day internet shutdown. 

Another economic effect is many international businesses reconsider their investments in these countries, and the region as a whole. The countries in West and Central Africa benefit a lot economically from having international investors and businesses operate within their countries, especially from a job creation, production and taxation perspective. This in turn will affect development and infrastructure project funding from international businesses, development donor countries and other financial institutions. Economic development requires adequate infrastructure investments. 

Economic sanctions may be imposed by the international community to push for an end to the coups and to accomplish foreign policy ends. These economic sanctions may include arms embargoes, foreign assistance reductions and cut-offs, export and import limitations, asset freezes, tariff increases, revocation of most favoured nation trade status, negative votes in international financial institutions, withdrawal of diplomatic relations, visa denials, cancellation of air links and prohibitions on credit, financing and investment.

This has a pronounced negative effect on economic growth and prevents the countries concerned from engaging in trade, investment, lending money and participating in economic activities. In some cases countries go as far as asking foreign investors not to pay tax to the military regime until democracy is restored, thus affecting the regime’s revenue streams and ability to economically develop the country. 

Bank closures lead to transactional interference and most households and businesses experience cash shortages. There are serious risks to the stability of the banking and finance sector. Retail and service-based businesses either shut or drastically reduce their hours of operation because of operational and security issues. This also extends to difficulties accessing cash to pay wages and suppliers.

Considering how the informal sector in Africa relies on cash availability, which accounts for a big part of economic growth, many informal traders will suffer and cease to exist. Niger is one of the countries that had bank shutdowns, and cash machines stopped dispensing money during their coup, thus affecting cash flow.

The coups in West and Central Africa have affected the operations of manufacturers and businesses, which in turn affects employment opportunities and sees a reduction in income. The instability that comes with coups leads to supply chains becoming dysfunctional. For example, after Mali’s coup several companies laid off workers and struggled to pay taxes. The tourism sector dried up due to security concerns, thus leading to several major hotels in the capital Bamako shutting down, and companies such as Illovo pulled out of a $310m sugar project in the country, largely due to political risk and funding difficulties. 

Coups also cause migration, leading to a loss in the labour force of the country, including skilled labour market migration. Outward migration raises urban unskilled unemployment and leads to lower incomes in the coup country, thus affecting economic development. 

While the ill effects of military and electoral coups in West and Central Africa are many and varied, there can be positive effects when the government that is overthrown is despotic. For example, coups may assist in restoring the rule of law and democracy, rehabilitate national pride and unity and strengthen national infrastructure and the economy. Unfortunately, most regime changes in Africa have led to prolonged periods of instability, with negative economic effects on balance.

Though the idea of a regime change may generate excitement after decades of poor governance, corruption and deteriorating security under authoritarian rule, military leadership transitions present their own challenges of weak institutions, fragmented leadership structures due to competing factions of the military and governing party, and economic development being neglected.

There is no knowing whether such transitions will be orderly or disorderly, violent or nonviolent, and whether they will bring about positive change or maintain the status quo. Unfortunately, even if the military succeeds to some degree in normalising economic activity the economic damage done will almost always be profound and lasting. 

• Mokgonyana is a legal and development practitioner focusing on human rights protection, international trade and investment and peace and security.