Egypt has knocked South Africa from its long-standing top spot regarding investments in Africa, according to Rand Merchant Bank’s latest Where to Invest in Africa report for 2018, released on Monday.
This is the first time SA has not been in top spot since the report was initiated seven years ago. Nigeria, on the other hand, has for the first time not featured in the Top 10. This is due to its short-term investment appeal having been eroded by recessionary conditions, according to the report.
The report focuses on the main sources of dollar revenues in Africa, which allows it to measure the most important income generators and identify investment opportunities. The 2018 report also balances economic activity against the relative ease of doing business.
Egypt displaced SA largely because of its superior economic activity score, while SA has shown sluggish growth rates, which have deteriorated markedly over the past seven years.
While the report found that SA also faces mounting concerns over issues of institutional strength and governance, there are some things still counting in the country’s favour. These include the rand, equity and capital markets, which the report points out are still “a cut above the rest” compared to many other African nations facing liquidity constraints.
The report also points out that, although Botswana, Mauritius and Namibia are widely rated as investment grade economies, they do not feature in the report’s Top 10 mostly because of the relatively small sizes of their markets. Market size has been a key consideration in the report’s methodology.
“From a global perspective, African countries are still at the lower end of the global-performance spectrum, which continues to be dominated by the US, UK, Australia and Germany,” the report states.
Brink of disaster
One of the conclusions of the report is that Africa 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.