Arusha Market - Photo by N. Feans - CC-BY-2.0
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Political Risk in Frontier Markets: Exclusive Q&A with Jonathan Berman

Raleigh Addington
Raleigh Addington
editor at Chartwell Speakers

Jonathan BermanIn an exclusive Q&A for ATG|Chartwell’s quarterly INSIGHT magazineJonathan Berman, a leading analyst on the strategic & operational challenges in Frontier Markets, talks opportunities and emerging market politics.

Many see growth in frontier markets but are concerned about corrupt government or just dysfunctional governments. Are they right to be worried?
They’re right to consider it. For some, the remedy is to build an effective relationship with government. An effective relationship with most frontier market government begins with understanding the demands on them. In many cases, the government is not fully equipped to respond to those demands, and they’re open to help. That’s an opportunity for companies and investors. GE and IBM are two big companies doing that well today, and building political capital as a result. Even a consumer goods companies like Unilever, which has little government business, has a well-defined view on big public needs in emerging markets, and that helps drive the significant earnings they enjoy in frontier markets. Companies shouldn’t displace government in these countries, but they should become more active partners with government.

Some markets which were highly touted last year are in turmoil now. How should I think about instability and political risk?
The companies and investors doing well in frontier markets discern long term opportunity through the fog of short-term political or even military turmoil. Nigeria’s a good example. With a violent Moslem movement in the North and dramatic tensions in the ruling class, Nigeria is repeatedly described in the media as “on the brink”. That’s true, but not much of a risk. The brink is where Nigerian politics resides. Most political deals don’t happen until everyone is facing an apocalypse (commercial deals run a bit smoother). Meanwhile, rapid growth goes forward in sectors from agribusiness to retail. The investor who can discern that habit from an actual crisis can find significant opportunities.

Are political connections necessary to succeed in frontier markets?
Political wisdom is necessary. Political connections are useful but not always necessary. I talked about this recently with one of the most successful private equity investors in frontier markets, who’s also a friend. Any deal that relies on political relations is a red flag for him, if only because it’s a risk he can’t calculate. Are there some people getting rich on contacts? Sure, but it’s not much of a business model. For investors, it’s more important to understand the political dynamics influencing an investment. For operating companies, it’s more valuable to engage with politicians to solve big problems.

What affect is the internet having on emerging markets politics that I haven’t heard already?
In Egypt and elsewhere, we’ve all seen that social media connects the population, in ways that can threaten governments. What you hear less about is the commercial opportunity in deploying social media and digital to help governments meet their populations’ demands. A lot of governments see the Arab Spring and realize they need to get ahead of that trend. They are using social media to learn what constituents want. It’s often the first time they’ve had to do that. They are also using data rich solutions to deliver it. Kenya relieved traffic in its capital using little more than ten cameras and a good algorithm. Imagine what they could do with more.

For information on Jonathan’s speaking availability, please contact our Head of Research, Huw Diprose, at or call +44 (0) 207 792 3002

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Jonathan Berman
Thought Leader on Frontier Markets