The following extract is obtained from an article published by RSM International Ltd. titled “The business risks in post-pandemic Africa: Unstable financial markets”. Odirile Setlhoka, RSM Botswana, suggests that for middle market businesses, “Instability within financial markets is posing myriad challenges, including the impact from inflation, liquidity issues, rising interest rates, and access to credit due to reduced lending. All of these present risks for business investors. Further risks come from potential repatriation of profits, with some countries in Africa having rather tight tax laws, especially on withdrawal of profits or payment of dividends to foreign shareholders. “Rigorous evaluation in financial planning is vital in mitigating the risks of financial instability, with liquidity issues being a key point of focus. Post pandemic, most companies in Botswana are looking to raise capital to finance the recovery of their business operations. 

Their first objective is to manage liquidity to ensure that there is enough cash available to fund the day-to-day operations and ongoing business activities. “Given the uncertainty created by COVID, improvement of working capital management is important, especially the accelerated collection of debts. Restructuring of the balance sheet may also be important in conserving cash. Businesses with robust working capital management practices and a strong cash position will likely receive a warm reception from lenders.” In Eswatini, Mphile Manana says, “Just as the economy was starting to make a rebound from the effects of the pandemic, the Russian war in Ukraine has become another factor impacting the growth of economies. A surge in global oil prices has resulted in an increase in fuel prices which in turn has led to an increase in prices of inputs and food. “Our currencies have been taking a beating as they are depreciating against the major currencies and this has resulted in an increase in the cost of imported supplies and inputs. Inflation has also increased which in turn has led to an increase in the cost of borrowing as commercial banks increase lending rates.”

Based on the information provided, identify and explain five financial risks that impact investors or companies in Africa in the post-pandemic era. In addition, you are also required to provide practical guidance to investors or companies on how each of the identified financial risks can be managed.