FACTBOX-Five risks to watch in Africa

JOHANNESBURG Aug 11 (Reuters) - Africa might have emerged as a more mainstream investment destination in the past decade, but it remains the world's poorest continent and one where politics, violence and weather can still dominate markets.

Below are some risks factors to watch for the continent and its largest economies.

SOUTH AFRICA TENSIONS

New South African President Jacob Zuma is walking a thin line between pledges to his powerbase among trade unions, leftists and poor township dwellers and promises to foreign investors -- with the latter watching closely as he faces his first tests.

This year's July and August wage negotiation season has added tensions because inflation is falling and Africa's biggest economy is stuck in its first recession in 17 years, leaving public and private sector bosses unable or unwilling to meet union demands for salary hikes of as much as 15 percent.

Week-long walk-outs by municipal and construction workers, some of them building 2010 World Cup stadiums, had no impact on the economy, but the possibility of industrial action at state power producer Eskom is much more serious.

Platinum XPT= and gold XAU= prices ticked up and the rand ZAR=D3 weakened last week on fears a long Eskom strike could trigger a repeat of the power outages that severely disrupted the mining sector last year.

The chief negotiator from South Africa's biggest union said on Monday he did not see an imminent strike as the two sides came closer together in negotiations.

But even if the strike season passes without further incident, investors will be looking at how Zuma handles township discontent over policy, joblessness and poverty a decade and a half after the end of apartheid.

SUB-SAHARAN DEFICITS

While debt forgiveness, a commodity boom and improved fiscal discipline have led to manageable levels of external public debt in most African countries, the slump in minerals prices and declines in external remittances and foreign direct investment flows have widened current account and fiscal deficits.

Having suffered in the emerging market rout of late 2008/early 2009, sub-Saharan African currencies appear to be on a more stable footing, but an inability to service their twin deficits could trigger another wave of weakness, reigniting inflation and undoing all the progress made in building a solid macroeconomic framework.

This is true in countries such as Angola and Nigeria, the continent's two biggest oil producers, as well as Botswana, Kenya, Uganda, Tanzania, Zambia.

A pre-election blow-out in 2008 took Ghana's fiscal deficit to 15 percent of GDP, although the prospect of off-shore oil coming online in the next couple of years should ease pressure.

EL NINO

Despite all the hype about natural resource booms and free market reforms, most sub-Saharan African countries remain heavily reliant on agriculture, both to feed their people and for exports, and a run of strong harvests helped underpin the racy economic growth of the last five years.

However, an El Nino weather pattern developing in the Pacific Ocean could put paid to that if, as forecasters are predicting, it brings drought to most parts of southern Africa.

Conversely, east African countries such as Kenya, Uganda, Tanzania and Ethiopia are set for strong rains if the El Nino effects play out on the continent as they have in the past.

Worryingly for Africa, relatively moderate El Ninos in 1991/92 and 2006/07 had quite a strong climatic impact on the continent, while the big one in 1997/98 did not.

NIGER DELTA INSTABILITY

A 60-day amnesty period began on Aug. 6 for gunmen in the Niger Delta to receive a presidential pardon if they hand over their weapons.

On paper, the programme appears to be the most comprehensive of its kind to try to stem unrest which has prevented Nigeria from pumping much above 2 million barrels per day (bpd) of oil in recent years.

Central Bank Governor Lamido Sanusi told Reuters last week that growth in sub-Saharan Africa's second-biggest economy this year hinges on finding a solution in the delta. But critics say government has not properly thought through what it will do with the fighters who agree to disarm.

There is no comprehensive employment or training scheme, and cynics fear that once the money runs out, unrest will resurface.

Some key militants, including Henry Okah, leader of the main MEND militant group, have agreed to take part. Others have not, and kidnapping in the region is likely to continue.

KENYAN POLITICS

The coalition running east Africa's biggest economy is torn by disagreement over how to bring to justice the perpetrators of last years post-election violence, the worst bloodshed since independence from Britain in 1963.

Kenyan markets crashed during the crisis at the start of 2008 and have been jittery over the political rifts.

During a visit last week, U.S. Secretary of State Hillary Clinton scolded President Mwai Kibaki's government, saying it must quickly implement long-delayed reforms and that graft, impunity and rights abuses were holding the nation back.

The administration says it is doing all it can, but it is hamstrung by arguments over plans to create a local court to deal with the architects of last year's violence.

At the end of July, the government came up with a vague formula hinting at solutions through existing judicial systems and a truth and reconciliation body.

But that fell short of international calls for a special tribunal, and brought closer the possibility of an investigation and trial by the International Criminal Court (ICC). Prosecutors in The Hague have pledged to take on the case if Nairobi fails to set up its own clear mechanism for justice.

For five eurozone risks to watch for, click [ID:nL7421677]

For five risks to watch in the east EU, click [ID:LA417541]

For five Middle East risks to watch for, click [ID:nL775585]

(Additional reporting by Daniel Wallace in Nairobi and Nick Tattersall in Lagos)