SA was placed fourth, behind Seychelles, Mauritius and Egypt, on RMB’s 2024 “Where to Invest in Africa” rankings, with the study finding that high unemployment and inequality weigh on SA’s attractiveness as an investment destination despite its economic strengths.
SA cracked just one first place on RMB’s ranking of 31 of Africa’s 54 countries — for foreign exchange stability and liquidity. It was last for its GDP growth forecast, income inequality and unemployment.
“SA’s large economy is well diversified and well connected to the world, but it underperforms on all the human and social development indicators,” RMB chief economist Isaah Mhlanga said at the launch of the report on Tuesday.
The rankings were geared towards enabling investors to make long-term decisions, and social and human capital are fundamental to the performance and longevity of businesses.
“No skills, high unemployment is a cocktail ripe for social instability,” Mhlanga said. “Foreign investors will likely wait for evidence that SA’s many reform plans and procedures to stabilise multiple dire metrics are gaining traction,” the report added.
This is the first time since 2021 that RMB has updated its annual rankings of the most investable countries on the continent, and it has done so based on an updated and more robust methodology that provides much more granular detail, enabling different types of investors to identify which countries might be most attractive to their particular businesses. It also enables policymakers to identify what they can do to make their economies more attractive to investment.
SA’s ranking has fallen from third in the 2021 study, when it was placed behind Egypt and Morocco. Morocco is now fifth. Bottom of the list are Lesotho, the Democratic Republic of Congo, Eswatini and Zimbabwe.
Mauritius’s high ranking reflects its diverse economy in the ICT, travel and tourism, financial and insurance, and fishing sectors, as well as its high scores on economic freedom and innovation, political stability and human development.
Seychelles was highly ranked for its “well-run economy” and innovation. Researchers found its population had jumped from 99,000 to 120,000 after a change to its visa regime prompted a surge in skilled immigrants.
Egypt last year passed SA to become the continent’s largest economy measured by dollar GDP. It scored well on economic performance and potential, but came last on personal freedom.
The 31 markets covered by the study collectively account for 92% of Africa’s GDP and more than 1-billion people. The study scores them on four “pillars” including economic performance and potential, market accessibility and innovation, economic stability and the investment climate, and social and human development.
It also identifies five “archetypes” that put on the lens of different types of investors, said Gordon Institute of Business Science professor Adrian Saville, who worked on developing it.
A fast-moving consumer goods company seeking markets for disposable diapers might want to look at a “people potential” market, with high population growth and urbanisation and positioned to benefit from the demographic dividend, whereas a company seeking to sell goods and services into multiple markets might want to position itself in one of the “global connector’ countries — among them Mauritius, SA and Morocco.
Among the other archetypes are “low base boomers” such as Mozambique and Senegal — small markets with high potential that are attracting significant foreign direct investment in their oil and gas finds.
Saville said it was important for investors to be able to enter and exit a market, and to have confidence that they could get currency out and repatriate capital. Several smaller African economies have in recent months seen substantial devaluations and issues with currency liquidity, and some scored very low on the foreign currency ranking of the index, but there had been significant reforms in foreign exchange stability and liquidity.
Along with the demographics that make the continent attractive for investors (a median age of 20 vs Europe’s 40) and its mineral resource and arable land endowments, Africa stands to benefit from the African Continental Free Trade Area and has a huge infrastructure deficit, which is a huge opportunity for investors. Saville noted there are 980 large dams in Sub-Saharan Africa, 589 of which are in SA — compared with more than 1,000 in Canada alone.
The Economist magazine has estimated $100bn a year needs to be spent to get Africa’s rail networks up to the levels of India or China, but only $6bn was invested over the past decade.
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