Kenya and Ethiopia might soon outshine Africa's economic giants, Nigeria, South Africa and Egypt in the competition for investment, a report by global risk consultancy, Control Risks says.
Why Kenya,Ethiopia might soon outshine Africa's economic giants in attracting investments
Africa’s economic giants, Nigeria, South Africa and Egypt, have been stumbling recently.
The report, Africa Risk-Reward Index, noted that Africa’s economic giants, Nigeria, South Africa and Egypt, have been stumbling recently. It stated that while Nigeria and South Africa have recovered, there are still some risks.
Ethiopia, which is one of the fastest growing countries in the continent, outperformed all African countries in the survey. The country attracted 3.2 billion U.S. dollars of foreign direct investment in 2016. Between 2010 and 2015, economic growth averaged 10 percent and was 6.5 percent last year.
"Experienced investors, not only in Africa but around the world, know that risk and reward are close companions," said Paul Gabriel, senior analyst for Africa at Control Risks and lead-author of the report.
"While no serious investor should overlook the economic giants of the continent, real competitive edge can only be achieved when investors manage to stay ahead of the pack in knowing what's next," he added.
Kenya had an average economy growth of 6 per cent between 2010 and 2016 and is expected to be at 5.4 per cent this year.
“A well-educated workforce and an innovative service sector, the government's continued investments in upgrading critical national infrastructure, and deepening integration with its neighbors through the East African Community (EAC) all allow the country to act as a gateway into the larger East Africa region," said the Africa Risk-Reward Index report that provides investors with a synthesis of risks and opportunities across the African continent
The report notes that rising security risks and political instability in Egypt, economic downturn and militancy in Nigeria and escalating political risks in South Africa led to doubts whether the balance between risks and opportunities in these markets is still favourable for businesses.
While Nigeria’s energy sector gives the country an appeal, a fall in oil prices and lower production due to insurgent attacks in the Niger Delta have slashed growth from 6.3% in 2014 to 2.7% in 2015. The country had a 1.6 percent economic growth and is expected to be at 1.1 percent this year.
South Africa has for a long period enjoyed a deserved reputation as Africa’s pre-eminent constitutional democracy. However, several of its key institutions have gradually weakened over the past decade. The report states that economic prospects are closely linked to the outcomes of the ANC’s national conference in December.
“The forecasted real GDP growth of 0.5% for 2017 is below population growth and certainly insufficient to reduce South Africa’s staggering 27.7% unemployment rate.”
Egypton the other hand has stable political position but economic and security challenges remain. The report indicated that the government have made progress in addressing fiscal problems. Last year the country's economic growth was 4.3 per cent and is expected to grow to 3.8 per cent.
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