Sometimes, one week reveals how many forces are quietly shaping Africa at once. A war in the Middle East suddenly puts the Red Sea and Horn of Africa back at the center of global security. Ethiopia’s $1.5B reliance on Djibouti’s port shows how geography still drives strategy. Markets are reacting to oil, currencies and debt risk. And beneath it all, a quieter shift is underway: AI and embedded finance are starting to change how African businesses access capital.
Figure of the Week
Ethiopia pays about $1.5B each year to route most of its trade through the port of Djibouti, underscoring the economic pressure behind Addis Ababa’s push for direct Red Sea access.
Source: Associated Press. Note: In case you are wondering “how much power does Ethiopia sell to Djibouti?” it’s only about $30M per year.
Graphic of the Week
Red Sea Spillover
Source: Critical Threats
Sadly, your question this week may be: How does the war in the Middle East impact Africa?
Analysis from the Critical Threats Project suggests the Iran conflict could spill into the Red Sea and Horn of Africa, potentially triggering Houthi attacks on regional bases and shipping while reshaping Gulf rivalries tied to conflicts in Sudan and tensions around Ethiopia.
Their graphic maps regional actors along a spectrum from “strong revisionist” powers seeking to reshape the Red Sea order to “status quo” states focused on stability, highlighting the competing coalitions shaping the region.
Why It Matters
Possible targets include sites linked to the United States, Israel or United Arab Emirates, including the U.S. base at Camp Lemonnier in Djibouti.
Gulf states may shift attention away from proxy competition in Africa, affecting conflicts in Sudan and northern Ethiopia.
With global shipping flowing through the Bab el-Mandeb Strait, escalation would quickly connect African security to the wider Middle East war.
Taking a wider look at likely economic, diplomatic and security impacts, my colleague John Kriegsman provided some helpful thoughts on what to watch for:
Oil and Commodities: Higher oil prices split Africa. Exporters benefit if Brent crude near $85 holds. Importers face inflation and wider trade deficits. Gold remains volatile but elevated, a modest boost for producers.
Debt Markets: Geopolitical shocks typically widen spreads for frontier markets. If short-lived, the impact is limited. Prolonged conflict could push borrowing costs higher and again price some African issuers out of markets, as it did after Russia’s 2022 invasion of Ukraine.
Rates and Currencies: Amid the war, the USD is stronger on safe-haven buying (amid a declining trend); a stronger U.S. dollar and higher energy and shipping prices could force African central banks to delay rate cuts, after several countries, including Nigeria, Kenya and Egypt, eased policy last month.
Migration and Aid: A prolonged war could trigger Iranian migration toward Europe, as occurred after the Syrian refugee crisis, potentially diverting European aid budgets further away from Africa.
Diplomacy: African governments may face awkward UN votes and public positions, balancing Western, Gulf and BRICS relationships.
Trade and Tourism: Direct trade exposure to Iran is small but disruptions to Gulf flight routes and uncertainty could dent tourism and some exports, such as Kenyan tea.
Security: The war’s religious and geopolitical optics could heighten regional tensions, spark civil society reactions or trigger extremist activity in parts of Africa, potentially affecting tourism and investment.
Source: Les Cles du Moyen-Orient
What We Are Reading
Africa: Middle East war risked higher oil prices and may delay further interest rate cuts across the continent (Bloomberg); MTN announced it expects full-year earnings to more than quadruple due to stronger performance in Nigeria and Ghana (Bloomberg); Despite years of investment in outlets like CGTN, Xinhua and China Daily, Beijing’s effort to shape the news narrative in Africa has drawn little audience traction, with viewership still far behind global competitors such as BBC and Al Jazeera (Bloomberg).
DR Congo: The U.S. is making progress to access critical minerals, but conflict, licensing disputes and slower Western compliance rules are slowing efforts to challenge China’s dominance (Reuters).
Egypt: The Pound briefly weakened past 50 EGP per dollar for the first time since June 2025, as Middle East conflict fears triggered roughly $2.5B–$3B in investor outflows (Bloomberg).
Ghana: Cocoa farmers remained trapped in poverty despite record global prices due to small farms' low productivity, poor roads, ageing trees and a recent government price cut (FT).
Guinea signed $143M five-year deal with U.S. to strengthen health systems and fight malaria and polio (Bloomberg).
Kenya: Brigid Kosgei won the Tokyo Marathon with a record time of 2:14:29 and plans to represent Turkey at the 2028 Olympics (BBC Africa).
Malawi: Public debt exceeded 90% of GDP, prompting plans for IMF support and debt restructuring to stabilize the economy (Reuters).
Nigeria: The 2027 presidential election was moved to January 16, catching the opposition off guard and strengthening President Tinubu’s reelection prospects (Bloomberg).
Senegal: Prime Minister Sonko said his party could leave government and return to opposition if President Faye diverges from party’s vision amid tensions and IMF delays (Reuters).
South Africa: Rio Tinto will restart the $473M Zulti South mineral sands project in KwaZulu-Natal, extending the life of Richards Bay Minerals operations to 2050 after the project was halted for six years due to community unrest (Reuters); A building under construction in Johannesburg collapsed, killing at least six and trapping others as rescue teams respond (AP News).
South Sudan: At least 169 people killed after insurgents raided a remote village as escalating violence threatens fragile peace (AP News).
Rwanda: The U.S. sanctioned the Rwanda Defence Force and four officials for backing M23 rebel movement in eastern Democratic Republic of the Congo, escalating pressure over a conflict tied to control of strategic mineral region (Bloomberg).
Uganda Central bank to start domestic gold buying program this month, aiming to purchase 100 kg to boost reserves and protect economy (Reuters).
Business and Finance in Africa
Top 10 African FX Leaders
Source: Business Insider Africa
Access to foreign exchange remains uneven across Africa as global financial conditions tighten, with countries that maintain transparent, liquid currency markets attracting more investment and trade, according to the Absa Group Africa Financial Markets Index.
Why It Matters
Weak FX systems, parallel markets and rationing still deter investors in many economies.
Reform momentum is building as countries adopt global standards like the FX Global Code.
Improvements in markets such as Nigeria show how FX reforms can quickly restore investor confidence and capital flows.
Read more: Business Insider Africa
Venture Capital in Africa
The VC in Africa section on embedded finance is written by Matthew Davis of Renew Capital.
Africa's Embedded Finance Moment
Three stories landed this past month that, taken together, tell a bigger story. Flutterwave acquired open banking startup Mono, combining Africa's largest payments network with bank data APIs that can verify identity and underwrite credit at scale. Days later, South African fintech Lula raised $21M from Dutch development bank FMO to expand its AI-powered lending platform for small businesses, approving loans in 24 hours that traditional banks won't touch. And lastly, African startup funding hit $487M in the first two months of 2026, with debt capital, the fuel of lending platforms, up 165% year-on-year.
This is the pattern we've been watching: AI is slashing the cost of building B2B SaaS tools for African businesses. Those platforms generate transaction data. That data becomes the credit score banks never had. The result could be embedded finance that begins to close Africa’s $331B SME financing gap, something decades of development finance failed to solve.
At the same time, a young generation that may never find formal jobs is launching mobile-first businesses, pushing demand for capital even higher.
The real question: Can AI, mobile and embedded credit achieve in a decade what aid failed to do in fifty years — put capital directly in the hands of African entrepreneurs, exactly when they need it, through the phone in their pocket?
Peace & Security in Africa
Horn Tensions Rise
I had not seen the cost of Ethiopia’s dependence on Djibouti quantified before. According to the Associated Press this week, Ethiopia pays about $1.5B a year to use the port of Djibouti for most of its trade.
The Latest
Prime Minister Abiy Ahmed staged a military parade signaling Ethiopia’s determination to secure sovereign Red Sea access.
Messaging referenced the Eritrean port of Assab, lost when Eritrea gained independence in 1993.
Analysts say troop movements and rhetoric are raising fears of a new conflict between Ethiopia and Eritrea.
Why It Matters
Ethiopia, with more than 130 million people, is the world’s most populous landlocked country.
Heavy reliance on Djibouti creates a strategic vulnerability and major economic cost.
Ethiopia already tried to solve this with the Ethiopia–Somaliland port deal, which angered Somalia and heightened regional tensions.
Any move toward Assab could trigger a broader Horn of Africa confrontation involving Eritrea, Tigray factions and regional powers. I am hoping the situation de-escalates for my adopted country of 14 years. Read more: Associated Press
Explorations in Africa
Mozambique’s Mermaid Isles
Source: FT
Who knew that the gorgeous waters around the Bazaruto Archipelago in Mozambique host one of the last populations of dugongs in the western Indian Ocean? In a recent Financial Times article, travel writer David Pilling visits the islands partly in search of these elusive creatures. The dugong, a rare marine mammal and a close relative of the manatee, grazes on seagrass and has long inspired sailors’ legends of mermaids. In case you are interested in visiting, here’s the quick summary:
The Bazaruto islands remain one of the Indian Ocean’s least developed luxury destinations, mixing fishing villages with a small number of resorts such as Kisawa Sanctuary and Azura Benguerra.
The archipelago sits inside Bazaruto Archipelago National Park, where conservation efforts focus on coral reefs, sea turtles and endangered dugongs.
Dugongs, slow-moving marine mammals that weigh about 300 kg, live in shallow seagrass beds and are among the region’s rarest animals.
Conservation work led by African Parks and the Bazaruto Center for Scientific Studies protect the mammals and the marine ecosystems they live in while creating local jobs.
Source: Bazaruto Incoming Agency
Thanks for reading. In case you missed it, check out our piece on credit ratings from February 6, 2026. Email us at [email protected] if you have comments or suggestions.
