A political risk analysis is an approach to address political risks in a systematic way. This is essential for any company seeking to invest in developing countries in order to reduce the uncertainty related to investments.
The objective of this research study was to conduct a political risk analysis of SN Power AfriCA (SNPA) in the sub-Saharan region. The aim was to discuss the conditions that enable SNPA to mitigate their political risks in Zambia, South Africa and Mozambique all perceived as high-risk destinations. This was done through a systematic analysis: First by identifying the relevant risks, thereafter assessing the risks, and analyzing the company capabilities of SNPA, followed by a measurement of the risks. This constituted the basis for analyzing whether the company capabilities in conjunction with the proposed risk mitigation measures had the potential to mitigate the high-risks of these countries. As such, this thesis aimed for theory development, as political risk management analysis on hydropower companies in sub-Saharan Africa has not been conducted academically before.
The findings indicate that there are certain conditions that enable SN Power AfriCA to manage its high political risks in Zambia, South Africa and Mozambique, and that the ability to mitigate risks depend on the company’s capabilities as well as the various risk mitigation measures proposed in this study, such as the company’s position in the world industry, the backing from multilateral financial institutions, risk sharing and transfer, strategic relationships and political risk policies. However, as company capabilities mainly cover the relation between the company and host governments, they are of limited utility to be risk mitigating since political risks in these countries mainly are local. The findings indicate that despite of the notion that African countries are high-risk destinations, investments in the continent are possible. This is valid, at least for hydropower companies sharing the same characteristics as SNPA, which invest in countries with the same contextual attributes as Zambia, South Africa and Mozambique.