Modelling Country Risk of Zambia

The book Political Risk: Facing the Threat of Global Insecurity in the Twenty-First Century by Condoleezza Rice and Amy Zegart provides a remarkable overview of the political risk discipline, demonstrating its evolution and growing literature. The ten-chapter book is carefully curated to identify the importance of stakeholders understanding political risk and its evolution in the present century. The writings presented in the book are relevant, but not limited to, businesspersons, government actors, international relations practitioners, corporate personnel, policymakers, organizations, and students – especially given the rate at which the world is changing.

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Italy’s New Government: Business as Usual

Posted on January 30, 2023 by Assistant Editor

Journal of Political Risk, Vol. 11, No. 1, January 2023

Lorenzo Ammirati

The image depicts a poster with a stylized black-and-white illustration of a woman wearing a military-style uniform and cap, reminiscent of fascist propaganda art. The background features the Italian flag with vertical green, white, and red stripes. Below the image, in bold black and red text, is the label "MUSS-MELONI", which is a play on the names of Benito Mussolini, the Italian fascist dictator, and Giorgia Meloni, the Italian politician. The image appears to be a piece of street art or protest art, criticizing Meloni by drawing a parallel between her and Mussolini.

Poster of Giorgia Meloni, leader of the Brothers of Italy Party, 2022. Source: Duncan Cumming via Flickr.

Nationalist identarian right-wing party Fratelli d’Italia (“Brothers of Italy”) was the only major Italian party to oppose former European Central Bank President Mario Draghi’s “national unity” coalition government which governed Italy between February 2021 and September 2022. Among the key campaign promises made by Fratelli d’Italia’s leader and current Italian Prime Minister Giorgia Meloni during the electoral campaign of September 2022 was a break with the economic policies of the Draghi government. However, the first Italian female Prime Minister has thus far demonstrated the opposite orientation.

In fact, Meloni’s sphere of decision making on economic policy is severely limited. Italy’s extremely high levels of public debt (above 150% of GDP) coupled with weak trust from financial markets and the European Union’s tight fiscal rules make it very costly (both financially and reputationally) for any Italian government to finance new public policies. Additionally, investments are currently mainly being made through the European Union’s Recovery Instrument, an ad-hoc fund created after the COVID-19 pandemic which lends money for EU approved projects, greatly constraining the power of the Italian government.

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Political Risk to the Mining Sector in South Africa

Posted on August 12, 2022 by Assistant Editor

Journal of Political Risk, Vol. 10, No. 8, August 2022

The image is of Randfontein Mine in Johannesburg, South Africa. Mining equipment dotters the brown landscape against a blue sky.

Randfontein Mine, Johannesburg, November 2014. Source: Paul Raad via Flickr.

Ndzalama Cleopatra Mathebula
Institute of Risk Management South Africa

Generally defined, political risk is the expected cost or loss incurred by a business due to political decisions, events, and actions. With the evolution of the discipline, it is not only government or organizations that can generate political risks, but also labour unions and civil society that can emanate risks. The South African mining sector includes abundant political risk yet is an attractive investment destination given its large platinum, gold, and coal reserves.

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Modelling the Country Risk of Zambia

Posted on March 24, 2022 by Assistant Editor

Journal of Political Risk, Vol. 10, No. 3, March 2022

Simon Muwando
University of Lusaka

Victor Gumbo
University of Botswana

Gelson Tembo
University of Zambia

Abstract

The world has experienced a dramatic increase in the flow of transnational investments following increased internationalization and globalization of firms in the previous decade. Country risk exposure is a cause for concern for all the institutions that are engaged in multinational trade and finance. The main objective of this study is modelling Zambia’s country risk. A mixed method with concurrent research design was employed. Personal interviews were the main instrument for collection of primary data and snowball sampling was used to select the interviewees. Secondary data was collected from the Lusaka Stock Exchange (LSE), Ministry of Finance, Bank of Zambia and Central Statistical Office. An autoregressive distributed lag technique was employed on annual data for the 1994 to 2018 period. This approach was chosen as it works best for small samples. The findings of the study revealed that the short run drivers for country risk of Zambia are beta, current account balance, political risk, unemployment rate and weighted short term interest rates. Current account balance was found to positively affect country risk while beta, political stability, and weighted short term interest rates negatively influence it. The study findings established that the long run determinants of country risk of Zambia are current account balance, betas, political risk, and unemployment rate. From the study findings, current account balance positively influences country risk of Zambia whereas beta, and political stability negatively influence country risk of Zambia. The study concluded that the major determinant of country risk of Zambia in the short run and long run is current account balance as it has significant positive influence. Effective policies need to be implemented by authorities to manage or reduce persistent current account deficits and political risk, in order to manage country risk.

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