JobnetAfrica is following the African economies from close range and in my work I clearly notice some movements in terms of countries doing well and countries slipping a bit. Therefore I find RMB’s Where to Invest a very interesting read and in this blog I publish their findings.
Rand Merchant Bank’s (RMB) seventh edition of Where to invest in Africa highlights those countries which have understood the need to adapt to the prolonged slowdown in commodity prices and sluggish levels of production growth – and those which haven’t.
The research focuses on the main sources of dollar revenues in Africa which allows it to measure the most important income generators and identify investment opportunities.
In this edition of Where to invest in Africa, RMB’s Investment Attractiveness Index, which balances economic activity against the relative ease of doing business, there are some interesting movements within the top 10.
Egypt New Number One, South Africa Drops
Notable omissions from the top 10 this year are Nigeria and Algeria, which have fallen from numbers six and 10 to numbers 13 and 15 respectively. Ethiopia and Rwanda, on the other hand, have climbed three and four places respectively.
But probably the most notable change is that South Africa has fallen from first place for the first time since the inception of the report, ceding its place to Egypt which is now Africa’s most attractive investment destination.
Egypt displaced South Africa largely because of its superior economic activity score and sluggish growth rates in South Africa, which have deteriorated markedly over the past seven years. South Africa also faces mounting concerns over issues of institutional strength and governance though in South Africa’s favour are its currency, equity and capital markets which are still a cut above the rest, with many other African nations facing liquidity constraints.
Morocco in Third Place, Ahead of Ethiopia and Ghana
Morocco retained its third position for a third consecutive year having benefitted from a greatly enhanced operating environment since the “Arab spring” which began in 2010. Surprisingly, Ethiopia, a country dogged by socio-political instability, displaced Ghana to take fourth spot mostly because of its rapid economic growth, having brushed past Kenya as the largest economy in East Africa. Ghana’s slide to fifth position was mostly due to perceptions of worsening corruption and weaker economic freedom.
Kenya Sixth, Ahead of Tanzania and Rwanda
Kenya holds firm in the top 10 at number six. Despite being surpassed by Ethiopia, investors are still attracted by Kenya’s diverse economic structure, pro-market policies and brisk consumer spending growth. A host of business-friendly reforms aimed at rooting out corruption and steady economic growth helped Tanzania climb by two places to number seven. Rwanda re-entered the top 10 having spent two years on the periphery, helped by being one of the fastest reforming economies in the world, high real growth rates and its continuing attempt to diversify its economy.
Tunisia and Cote d’Ivoire Complete Top Ten
At number nine, Tunisia has made great strides in advancing political transition while an improved business climate has been achieved by structural reforms, greater security and social stability. Côte d’Ivoire slipped two places to take up the 10th position. Although its business environment scoring is still relatively low, its government has made significant strides in inviting investment into the country leading to a strong increase in foreign direct investment over the years resulting in one of the fastest growing economies in Africa.
Nigeria Out of the Top Ten
For the first time, Nigeria does not feature in the top 10, with its short-term investment appeal having been eroded by recessionary conditions. Uganda is steadily closing in on the top 10 though market activity is likely to remain subdued after a tumultuous 2016 marred by election-related uncertainty, a debilitating drought and high commercial lending rates. Though Botswana, Mauritius and Namibia are widely rated as investment grade economies, they do not feature in the top 10 mostly because of the relatively small sizes of their markets – market size has been a key consideration in the report’s methodology.