The African continent 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, according to Rand Merchant Bank (RMB) analysts. Following the publication of the seventh edition of the Where to Invest in Africa 2018 report – where South Africa was replaced by Egypt as the top destination of choice for the first time since the report was initiated – analysts have highlighted that over the last three years many African governments have had to implement “deep and painful” budget cuts. They have also had to announce multiple currency devaluations and adopt aggressive monetary policy stances as a result of a significant drop in traditional revenues on the back of a slump in production and decreasing commodity prices. “Some countries have been more nimble and effective than others in managing shortfalls,” said RMB analyst and co-author of the report, Nema Ramkhelawan-Bhana. She pointed to South Africa’s drop to second place as Africa’s most favoured investment destination amid “mounting concerns over issues of institutional strength and governance” as being indicative of not being economically diverse enough to drive real growth. “Though in South Africa’s favour are its currency, equity and capital markets which are still a cut above the rest, with many other African nations facing liquidity constraints,” Ramkhelawan-Bhana added. Morocco retained its third position for a third consecutive year, having benefited from a greatly enhanced operating environment since the “Arab Spring” which began in 2010. Ethiopia – which remains dogged by socio-political instability – displaced Ghana to take fourth spot, mostly because of its rapid economic growth. Ghana’s slide to fifth position was mostly due to perceptions of worsening corruption and weaker economic freedom. Kenya held firm in the Top 10 at number six while what Ramkhelawan-Bhana describes as a “host of business-friendly reforms aimed at rooting out corruption and steady economic growth” helped Tanzania climb by two places to number seven. Rwanda re-entered the Top 10 at eighth place, with Tunisia taking the ninth slot. Cote d’Ivoire took the tenth position. Ramkhelawan-Bhana pointed out that though southern African countries such as Botswana and Namibia were widely rated as “investment grade economies”, they did not feature in the Top 10 mostly because of the relatively small sizes of their markets.
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In South Africa’s favour are its currency, equity and capital markets. – Nema Ramkhelawan- “ Bhana
