FACTBOX-Five risks to watch in Africa

By Ed Cropley, African Investment Correspondent

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