Although Namibia, Botswana and Mauritius have consistently ranked in the top 20 of the RMB Where to Invest in Africa index, their inability to reach the top 10 is mostly due to the restricted size of their domestic markets. South Africa has ranked in the number one position for six years.
In the latest edition of the index, released this week, the most notable changes are South Africa losing it top spot to Egypt, Nigeria and Algeria missing the top 10 altogether, and Etiopia and Rwanda entering the top 10.
Rand Merchant Bank said its Where to Invest in Africa 2018 Investment Attractiveness Index balances economic activity against the relative ease of doing business and the impact of the 2016 economic slump.
Egypt displaced South Africa largely because of its superior economic activity score and the sluggish growth rates in South Africa. It also faces mounting concerns over issues of institutional strength and governance though its currency, equity and capital markets are still a cut above the rest, with many other African nations facing liquidity constraints.
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 to root 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.
“One of the most important findings of the 2018 edition of Where to Invest in Africa is that the African continent could find itself hovering on the brink of disaster if it continues to depend on its current economic fundamentals and does not usher in economic diversification. Where to Invest in Africa 2018 highlights those countries which have understood the need to adapt to the prolonged slowdown in commodity prices and sluggish levels of production growth compared to those which have not,” stated RMB.
The theme for Where to Invest in Africa 2018 is “Money Talks.” It tracks investment on the African continent to evaluate aspects crucial to each country’s economic performance. The index follows the main sources of dollar revenues which allows it to measure the most important income generators and identify investment opportunities.
“Over the past three years, some African governments have had to implement deep and painful budget cuts, announce multiple currency devaluations and adopt hawkish monetary policy stances – all as a result of a significant drop in traditional revenues,” said RMB Africa analyst and index co-author Celeste Fauconnier.
“Some countries have been more nimble and effective than others in managing shortfalls,” said Nema Ramkhelawan-Bhana, also an RMB Africa analyst and co-author. “Major policy dilemmas have ensued, forcing governments to balance economically prudent solutions with what is politically palatable,” she added.
In Africa, the index measures the performance of 53 countries but it also includes 191 jurisdictions around the world, measuring Africa’s performance relative to other country groupings.