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Africa: Egypt leads as most attractive investment market

By Seth Onyango
Posted on Thursday, 11 November 2021 12:12

egypt giza
The Giza Pyramids in Cairo, Egypt were lit up on Jan. 30, 2021, (Mohamed El Zariff/Reaching the Last Mile via AP Images)

Egypt is the top continental investment destination as African states work at reducing bureaucratic obstacles to local and foreign direct investment.

By Seth Onyango – bird Newsroom

Egypt has come out on top with Morocco and South Africa the second and third most robust markets for investment, according to the latest Rand Merchant Bank report titled ‘Where to Invest in Africa 2021’.

Notably, smaller nations like Rwanda and Botswana moved up the rankings from position five and thirteen in 2020, to position four and five respectively in the latest index.

The report highlights a trend amongst investors willing to bypass traditional markets in Africa in favour of smaller states with economic hygiene.

Rwanda, as seen in a separate report published by PwC this year, has steadily climbed and maintained a high ranking in the ‘ease of doing business’ segment. The country currently ranks second on the continent after Mauritius in that report and is also one of only two countries in Africa to feature amongst the top 50 countries listed by PwC.

According to RMB, each state’s handling of the Covid-19 pandemic has emerged as an important indicator of a market’s ability to absorb external and internal shocks.

“A government’s ability to aid its economy in a period of deep crisis, either through direct fiscal stimulus or an ability to capitalise on its large distribution networks, has become crucial,” its report notes.

“We have therefore included a fiscal score as an additional pillar in our rankings based on available data. This indicator aims to score governments’ fiscal positions and provide a basis from which an investor can understand a specific jurisdiction.”

According to the author, RMB Africa Economist Daniel Kavishe, a “new world” calls for a new approach to the publication and this year’s report assesses the extent of the pandemic’s impact by sketching the landscape of the continent pre-Covid-19, and then painting a picture of both its actual and potential outcomes through and post, pandemic.

Where previous editions positively projected Africa’s prospects, discerned through reliable and readily available data, Covid-19 has muddied the analytical waters and compelled the team to adapt their methodology.

The approach required an extra layer of sophistication. Says Kavishe: “We created a new set of rankings that incorporated some of the unavoidable Covid-19-induced challenges, of which the operating environment score was one.”

Top ten investment-attractiveness ranked countries

  1. Egypt: While Egypt’s economy was hard hit by the pandemic, it was also one of the first to bounce back to a path of growth. This, owing to the swift measures it introduced and the fact that it been on a stronger footing at the outbreak of Covid-19.
  2. Morocco: The economy of Morocco continues to benefit from political stability. A special fund to combat Covid-19 was established in 2020, representing 2.7% of GDP. Two-thirds of the funds were to be provided by private sources and one-third by the government.
  3. South Africa: The southern-most country in Africa offers a strong manufacturing and retail base that will continue to support southern African regional economies with goods and services.
  4. Rwanda: Rwanda continues to benefit from the efforts it has made to improve its operating environment. Furthermore, as part of the National Strategy for Transformation (NST), various investments should support the construction and energy sectors over the next few years.
  5. Botswana: The country has high foreign-exchange reserves, which have enabled it to weather the pandemic-induced economic storm better than most. The Pula Fund, a sovereign fund created in 1994 that finances a large part of the budget deficit, has meant that fiscal dependency on the debt has been low.
  6. Ghana: Ghana entered the current crisis on a relatively stronger footing than its African peers. Structurally, its economy has seen major shifts over the past few years, positioning it for significant growth going forward. This is supported by primary-sector industries like oil and gold and accelerated development in the tertiary sector.
  7. Mauritius: Aided by an extremely favourable tax regime, its financial sector will remain one of the main drivers of Mauritius’ economy into the future – notably through cross-border investment activities and banking services.
  8. Côte d’Ivoire: A rise in private investment should continue to fuel construction, agri-industry and services (trade, transport and ICT in particular). Private investment will benefit from the impetus provided by public investment under the 2016-20 National Development Plan.
  9. Kenya: The Kenyan government’s efforts to ensure that implementation of the ‘Big Four’ plan focused on industrialisation, universal health coverage, food security and affordable housing will invariably lead to fast economic growth.
  10. Tanzania: Tanzania has been on a rapid path of development over the past few years. This growth can be attributed to consistent public investment from the government in key secondary and tertiary sectors, ranging from the energy sector to advancements in the telecommunications and finance sectors.

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