Zimbabwe, Egypt and Ghana demonstrate the most positive changes for business, followed closely by Nigeria and Mozambique
Zimbabwe, Egypt and Ghana are the leaders when comparing their September 2017 risk-reward score with the score from June 2018, according to the Africa Risk-Reward Index from Control Risks and Oxford Economics.
Followed closely by Nigeria and Mozambique, these countries show the largest improvement in their reward score, while at the same time reducing their risk scores for investing in these countries.
Jean Devlin, Partner and Head of African analysis at Control Risks, comments: “2017 was a challenging year for many African economies. But significant political changes, particularly in Southern Africa, and improved commodity prices have turned the tide for many markets. Africa’s largest markets – Nigeria, South Africa and Egypt – have all improved their Risk-Reward Scores, but we also find many smaller economies among the stars. Zimbabwe, Mozambique, Zambia and Senegal can be found among the top ten countries that improved their reward scores and reduced their risk scores. These developments clearly attract investors who are looking to expand their footprint on the continent.”
Key findings of the report:
• Angola’s leadership change has not yet improved its reward score, but its risk score has gone down: Angola’s new president, João Lourenço, has acted with remarkable speed and decisiveness to consolidate his authority. Efforts to dismantle his predecessor’s networks have provided new opportunities for foreign investment in sectors previously dominated by companies linked to the former president and his family. Combined with an improved regulatory environment, investors can seek opportunities predominantly in the oil and gas, diamond, and telecommunications sectors.
Reward score: 3.65 / risk score: 6.55
• South Africa – slightly increased reward score and reduced risk score as political uncertainty eases: Investor confidence has increased since Cyril Ramaphosa assumed the presidency in February 2018. The implementation of policies – intended to consolidate fiscal expenditure and tackle corruption in public institutions and state-owned enterprises – increases opportunities for doing business in South Africa. But deeply entrenched patronage networks and electoral pressure ahead of the 2019 general elections will contribute to a slow recovery of South Africa. Reward score: 4.78 / risk score: 4.74
• Kenya’s reward score remains one of the highest in sub-Saharan Africa, but the government’s external debt burden raises concerns: Winning the election in 2017, Kenya’s leading Jubilee Party of Kenya continues its pro-business policies. However, concerns arise over the government’s external debt burden, with a new USD 2bn Eurobond issued in February even as the proceeds of a previous issue have yet to be fully accounted for. Furthermore, improving relations between the government and the opposition will be instrumental in ensuring that political tensions do not undermine economic growth, and more prudent fiscal and macroeconomic policies are needed to maintain positive economic prospects. Reward score: 6.36 / risk score: 5.51
• Côte d’Ivoire, with a forecasted real GDP growth rate of 7% in 2018, continues its impressive economic recovery, but great challenges remain: With reforms to the business environment and efforts to bring foreign investors back after the 2010-2011 crisis, Côte d’Ivoire has achieved amongst the highest growth rates in the world in recent years, and sectors such as construction, telecommunications, banking and retail have seen considerable growth. However, severe obstacles to a full recovery persist, including political interference and corruption, socioeconomic discontent, shortcomings in security-sector reform, and growing competition ahead of the potentially volatile 2020 presidential poll.
Reward score: 6.51 / risk score: 6.24.
• Senegal – growing investment and a reduced risk score presage continuous growth: Under the Emerging Senegal Plan, growth has increased steadily over the last three years, reaching close to 6.4% in 2017. Growing exports, a more diversified economy and increased interest from large international investors as a result of the promising offshore oil and gas discoveries make Senegal one of the poster children in sub-Saharan Africa. The reduction in its risk score is one of the most positive changes in the 2018 Africa Risk-Reward Index. Reward score: 5.76 / risk score: 4.56
• Morocco – economic reforms improve the country’s resilience and make its exports more competitive, but social discontent remains a challenge: With one of the lowest risk scores on the 2018Africa Risk-Reward Index and a relatively stable reward score, Morocco’s economic reforms prove to be a success. Medium-term growth will be enhanced by continued reforms to facilitate foreign investment, access to finance, quality of education and the business environment, as these represent the primary constraints to competitiveness and doing business. However, social-economic unrest over poor living conditions persists particularly in interior regions. Reward score: 5.77 / risk score: 4.10
“Although several key elections in 2018 and 2019 – among them in Nigeria and South Africa – need to be closely monitored with regards to their impact on business, positive developments in many African countries will further strengthen efforts to diversify economies and increase their overall resilience against internal and external shocks,” concludes Devlin.