Where to invest in Africa in 2019

Where to invest in Africa in 2019

February 7, 2019
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Africa as a continent is full of investment opportunities given the presence of several untapped resources across the continent. Investment opportunities in Africa can easily be found in almost all the sectors of the countries’ economy. There are potential investment opportunities in Sectors like transport, health, education, technology, manufacturing, agriculture and mining.

The Rand Merchant Bank (RMB) of South Africa embarks on research and compiles a report every year entitled “where to invest in Africa”. In this report, the bank gives detailed information after analysing each country on the continent, assessing their investment potentials, pointing out the major strengths and weaknesses in the economy of such countries.

In their 8th edition this year of where to in Africa, the RMB has basically analyzed two areas which they termed as the most important conditions for viable investment in Africa including; Economic activity and The operating environment.

For any investing individual, group or company considering to bring their money to Africa, we believe “where to invest in Africa” should be your number one guide and point of reference. You will be guided on where to invest, in which sector to invest and the proper method to apply as you invest.

This is how the RMB ranked African countries in this year’s (2019) report of “where to invest in Africa”. The breakdown also indicates the reasons why investing in such a country is appropriate and the risks involved.

EGYPT

Why invest
• Egypt has the largest African market in terms of GDP and has the largest consumer market in the Middle East and North Africa
• The country also receives large amounts of Foreign Direct Investment (FDI)
• It is one of the most diversified African economies
• Forecast growth is above 4%
• There are strong improvements and reforms in the business environment
• There is a stable exchange rate and increasing availability of hard currency

Risks
• The Egyptian pound has been depreciating since its flotation in 2016, which has rendered hard-currency debt-servicing more difficult.
• The convertibility and rollover risks are expected to ease this year.

SOUTH AFRICA

Why invest
• South Africa is Africa’s hotspot for FDI. The government has embarked on building a US$100b book of foreign and domestic investment projects by attracting large investment from Saudi Arabia, the UAE and China.
• South Africa’s currency and capital markets are highly developed compared to the rest in the continent

Risks
• The subdued economic growth has hindered its overall scoring
• The division in the ruling party towards the upcoming elections of 2019 are hampering policymaking

MOROCCO

Why invest
• Morocco is Africa’s largest market, with an expected growth rate of 4% over the medium term.
• Since the end of the Arab Spring, the country has a greatly enhanced operating environment
• There is an enhanced investment appeal after the reintegration into the AU and the access to the Economic Community of West African States (ECOWAS).

Risks
• There is a heavy dependency on European tourism, FDI and remittance inflows
• However, there are no immediate threats to Morocco’s position in these rankings.

ETHIOPIA

Why invest
• Ethiopia is Africa’s fastest-growing economy and one of the continent’s six largest
• There is great success in nurturing comparative advantage, especially in agriculture and manufacturing
• A significant rise in demand for goods and services given a huge population of almost 100 million people

Risks
• The debt-distress rating from IMF though started moderate, has deteriorated to high risk
• The high debt risk could force the government to open its doors to more FDI through relaxing some of its stringent regulations like hard-currency repatriation

KENYA

Why invest
• Kenya has an expected GDP growth of above 5% enhanced by her favorable weather and the calm political environment following the reconciliation of the 2017 reconciliation after the disputed elections
• Presence of diversified economy
• Registered significant expansion in several areas of the economy including consumer demand, urbanisation, EAC integration, structural reforms and infrastructure investment in oil pipeline, railways, ports and power generation

Risks
• There are still structural constraints like infrastructure deficiencies that continue to retard the economy.
• Periodical surprise terrorist attacks from the Al-Shabaab group of Somalia has continue to be a big threat to businesses in Kenya

RWANDA

Why invest
• Rwanda is one of Africa’s fastest growing economies
• The country has emerged second-best on the continent in terms of business environment after more than doubling the efficiency of her business environment in less than a decade
• The government is investing heavily in domestic industries and FDI has increased significantly in the past decade

Risks
• The market remains very small with only a 10 million population, opportunities for business expansion remain fewer than those in larger markets
• There is a high external risk coming from the spill-over in political instability from her neighbours of DRC and Burundi.

TANZANIA

Why invest
• Tanzania has an expected growth of above 6.5% over the next five years, supported by public-infrastructure investment and the service sector
• Resource-based manufacturing to register steady growth, enhance by tax breaks and development of special economic zones
• Tanzania’s economy size now overtaking Kenya’s.

Risks
• Low income per head and a poor business environment
• Economic-policy agenda remains inconsistent, continuing to lean towards economic nationalism
• Recent and abrupt tax increases, erratic regulatory changes and lack of transparency affecting current and potential investment

NIGERIA

Why invest
• Nigerians jumped back into the top 10 this year due to improved macroeconomics, supported by recovering oil prices and production
• Second-largest market in Africa
• Resources and favorable demographics attracting strong flow of FDI
• Liquidity crunch has subsided since 2017 on the back of a recovery in commodity prices and changes in FX regulations.
• With the largest population in Africa, domestic demand continues to rise.

Risks
• Growth constrained by weak policy environment and dire infrastructure
• Medium-term prospects stronger, with elections over and oil prices strengthening
• Oil to remain largest export earner due to government failure to undertake structural reform
• Exposed to global oil-price falls and disruptions to output resulting from instability in oil-producing regions.

GHANA

Why invest
Strong growth outlook concentrated around the oil and gas sector
• Non-oil growth to pick up, supported by pro-business reforms and steady improvement in power supply
• Political stability underpinned by strong democracy
• Remains one of the easier business environments in Africa

Risks
• Large public-debt burden requires considerable fiscal consolidation
• Commodity dependency leaves the country heavily exposed to International price changes. Oil, gold and cocoa remain Ghana’s main exports.

IVORY COAST

Why invest
• Ivory Coast is one of Francophone African countries with a diversified economy
• Strong growth rates supported by government’s pro-business reforms and a relatively stable political environment
• Large infrastructure projects especially in transport and energy supported by FDI, aid and government

Risks
• Challenging business environment
• Narrow export base, rising debt stocks and unpredictable political situation
• However, Ivory Coast is assured of remaining among the top 15 most attractive investment destinations for the foreseeable future.