Giant mobile billboard promotes investments in Egyptian economy in
Berlin, Germany, on June 3, 2015. South Africa’s Rand Merchant Bank
(RMB) report has ranked Egypt as the most attractive investment
destination in Africa. PHOTO | JOHN MACDOUGALL | AFP
Kenya, Rwanda and Tanzania will be among Africa’s most
attractive investment destinations in 2019, according to a new study by
South Africa’s Rand Merchant Bank (RMB).
The RMB
Investment Attractiveness index looks at countries’ economic and
operating environments to assess their potential to attract investment.
According
to the report, Where to Invest in Africa 2019, Africa’s overall
operating environment has improved only marginally since 2017 due to
difficulties in getting financing, corruption, inadequate infrastructure
and weak governance.
In
East Africa, the report ranks Kenya as the most attractive, attributed
to the political reconciliation after the disputed 2017 presidential
election and the country’s sustained consumer demand.
Second
placed Rwanda, rated one of Africa’s fastest growing economies, has
more than doubled the efficiency of its business environment in less
than a decade with the government investing heavily in domestic
industries.
In ranking Tanzania third in the region, the report cites
government tax breaks, development of special economic zones, investment
in public infrastructure and growth in the services sector as
incentives for foreign investors.
In
the larger Eastern Africa, South Sudan is the worst rated country to do
business in on the continent, followed by the Democratic Republic of
Congo and Burundi.
South Sudan’s business environment has deteriorated the most, as its political instability prevents the economy from developing.
A
political peace deal in Juba notwithstanding, it will be a while before
investor confidence recovers to the post-Independence, pre-war levels.
According
to the report, Ethiopia, which is Africa’s fastest-growing economy, has
successfully managed to nurture its comparative advantage, particularly
in agriculture and manufacturing, and its demand for goods and services
is rising significantly given a market size of about 100 million
people.
Most attractive destinations
Continent-wide,
Egypt has retained the top spot as the most attractive investment
destination for the second year in a row, helped by its expanding
consumer market, increasing availability of hard currency, exchange rate
stability, a diversified economy and steady improvement in business
environment, particularly investment-related legal reforms.
It
is followed by South Africa, Morocco and Ethiopia, with Kenya, Rwanda
and Tanzania in fifth, sixth and seventh place respectively.
Nigeria, Ghana and Côte d’Ivoire complete the top 10 positions.
Egypt,
which is Africa’s largest recipient of foreign direct investment, has
the largest consumer market in the Middle East and North Africa.
“Egypt’s
economic activity scoring continues to dominate that of South Africa,
as the latter's growth forecasts and the size of its economy are
inferior to Egypt’s. This has weighed down its investment scoring,” says
the report.
In 2018, Egypt, Nigeria and South Africa
were the three largest markets in Africa in terms of GDP, and they are
expected to maintain these positions.
Together, the three markets make up almost 50 per cent of Africa’s estimated $7 trillion market.
On
a regional basis, in North Africa Egypt, Morocco, Tunisia, Algeria and
Libya dominate, contributing 37 per cent to Africa’s overall GDP.
Easiest business environment
Mauritius has the easiest business environment in Africa followed by Rwanda, Botswana, South Africa and the Seychelles.
The
country's ease of doing business has been boosted by its developed
infrastructure, healthy, well-educated workforce, the most efficient
goods market and strong institutions.
According
to the report, a pick-up in growth momentum in Africa and improving
individual operating environments are key to attracting foreign
investment to the continent.
“And investors being even
more discerning about which emerging and developing markets to invest
in, exposes the urgent need for governments to prioritise
competitiveness-enhancing business-environment reforms,” says the
report.
According to RMB, Africa’s growth momentum is
expected to slow down — with only a modest pick-up from 3.9 per cent in
2018 to 4.1 per cent in 2019.
It is argued that high
debt levels and a slowdown in credit growth pose significant risks to
Africa’s growth outlook in the medium term.
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