The 10 most attractive nations in Africa for investors

In the coming years, Africa’s economic growth is going to remain lower than that recorded over the last decade. That is what detects the Ernst & Young (EY) Africa attractiveness index, released last week. The study, titled “Africa attractiveness 2016: Navigating Africa’s current Uncertainties", confirms the International Monetary Fund’s (IMF) projection for 2016, now down to 3% and expected at 6.1% in April last year.

Tanger-Med Port (Morocco) Credit: Agence Ecofin

The EY analysts point out that the reasons that led to the Africa’s deceleration are the same that influenced negatively the global economy.

The reference is explicit to the various factors that have produced the unfavorable international economic climate caused by the general slowdown in emerging market economies; China’s rebalancing process; ongoing stagnation in most developed economies; lower commodity prices and higher borrowing costs.

However, the report notes that despite African growth has relatively decreased, two-thirds of Sub-Saharan African economies are still growing at rates above the global average, whereas Africa south of the Sahara will remain the second fastest-growing region in the world for the next future, after Emerging Asia.

Within the report planned to assess progress in the areas of governance, economic diversification and infrastructure, is also presented Africa Attractiveness Index (AAI), the index of the most attractive nations in Africa for investors. A ranking of the relative size of the opportunities for trade, human development and resilience of African economies in the context of the above-mentioned macroeconomic pressures.

South Africa first position on the continent

The first ranked country is South Africa, which despite the significant slowdown of its economy and the Rand depreciation, which between 2012 and 2015 has lost more than 50% of its value against the dollar, remains the most attractive for business.

The Rainbow Nation is supported by three elements: the extremely favorable environment for business, its political stability and much more developed and diversified economy compared with other continental competitors.

South Africa is followedby Morocco, Egypt, Kenya, Mauritius, Ghana, Botswana, Tunisiaand Rwanda.Ivory Coast closes the top ten index processed to provide different answers depending on the investor’s priorities, which wish to operate in complex and fragmented African markets.

The study also reveals that Africa is one of the only two regions in the world in which there was growth in the number of foreign direct investment (FDI) projects over the past year in 2015.

Last year, across Africa have been started 771 of these projects against the 722 in 2014, equivalent to an increase of 7%. A percentage figure in contrast with the global one, which shows a decrease of 5% in 2015.

However, these projects generated in 2015,77.3 billion dollars. A significant decrease compared with 88.5 billion dollars in 2014. Nevertheless, the revenues produced by FDI projects in 2015 are higher than the yearly African average of 68 billion, recorded in the 2010-2014 five-year period.

The report explains that the higher FDI inflows in Africa are from Western Europe and a leading role in fueling these investments is covered by intra-African actors.

It ‘also important to highlight that traditional investors, including North American and Middle Eastern ones, have focused attention on Africa. Last year the most active countries in the investments were France, the United States, United Arab Emirates, Portugal and China.

Mid-term outlook for many African countries remain uncertain

Despite this good performance, EY estimated that mid-term outlook for many African countries remain uncertain. Among these, particularly Nigeria and Angola, currently penalized by the collapse of oil prices.

The report also noted that Kenya and Cote d’Ivoire are benefiting from the strong economic growth and attractive growth prospects, thanks to the creation of new infrastructure and the ability to enter new markets.

While Botswana, Mauritius and Rwanda, although they are still small economies, have all achieved excellent results in business enablement, social development and economic management, and so perform relatively well.

Three North African countries, Egypt, Morocco and Tunisia, as well as Ghana in West Africa, remain under some pressure economically, but have the advantage of a relatively business-friendly environment, modern infrastructure and, in the case of Accra, a strong governance record of accomplishment.

In conclusion, it is interesting to note that Nigeria, the first economic power in the African continent, on the AAI ranked at number fifteen overall. Low scores on the business enablement, governance and human development cause Nigeria’s relative “underperformance”.

@afrofocus

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