Small African economies are exceeding expectations to become the most appealing to investors, supported by their greater economic and individual liberties.
A new study, ‘The 2024 RMB Where to Invest in Africa report,’ shows that investors are looking beyond markets with big populations and larger economies. Instead, they are seeking destinations with higher levels of stability and growth opportunities in a well-regulated environment.
The Rand Merchant Bank (RMB) and the Gordon Institute of Business Science collaborated to produce a report that ranks Seychelles and Mauritius as the top two investment destinations in Africa.
“Seychelles leads the rankings thanks to high levels of personal freedom, human development, and a stable economic environment. Seychelles offers a unique and attractive investment climate,” according to the report.
“Despite scoring lower on economic size and potential, Mauritius is known for innovation, economic freedom, and high GDP per capita. The report adds that it continues to be a top destination for investors seeking stability and growth opportunities in a well-regulated environment.
The two nations have been deemed as ‘global connectors’ due to their advanced economies and strong international presence.
In 2021, Egypt was ranked as the primary investment destination in Africa, followed by Morocco and South Africa. However, the latest report indicates a shift in the rankings for these major economies.
The rankings were based on four key metrics, which covered 31 countries representing 92% of Africa’s economic activities measured by Gross Domestic Product (GDP).
These metrics included social and human development, economic stability and investment climate, market accessibility and innovation, and economic performance and potential.
According to the authors of the report, they relied on data from various global institutions such as the World Bank, the International Monetary Fund, the African Development Bank, the United Nations, and the International Labour Organisation.
Other smaller markets described as ‘Low-Base Boomers’ with high potential for explosive growth include Rwanda, Mozambique, and Benin.
Rwanda ranks fifth on the continent in terms of economic stability and investment climate and fairly in terms of market access and innovation.
Mozambique ranks 10th on economic performance and potential, while Benin ranks sixth on social and human development, and 10th on economic stability and innovation, it also ranks fairly on economic performance and potential.
Cote d’Ivoire (social and human development, Economic performance and potential) and Namibia ( economic stability and investment climate and on market access and innovation) have also proved their investment attractiveness, giving giant economies a run.
A number of larger economies like Egypt, South Africa, and Morocco are in third, fourth and fifth places, respectively, as they battle to retain their shine to match their economic muscles.
Egypt topped the rankings in terms of economic performance and potential, market access, and innovation. However, the North African country ranked poorest at position 23 on economic stability and investment climate.
“Egypt represents Africa’s largest economy by GDP (2023), offering a substantial market with diverse opportunities in sectors like technology, manufacturing, and services. Its strategic location and economic complexity further enhance its attractiveness,” said the report.
Fourth-ranked South Africa, which topped the rankings on market accessibility and innovation, had a satisfactory rating on its economic stability and investment climate but ranked poorly on social and human development.
“Despite facing significant challenges, South Africa remains a crucial hub for investment in Africa. Its robust financial sector, diverse economy, and potential for infrastructure development make it a key player,” according to the report.
Closing on the top 5 most attractive investment destinations, Morocco also had its best rankings in market accessibility and innovation, economic stability and investment climate.
“Morocco’s strong performance in connectedness, innovation, and economic stability positions it as a top investment destination. Its strategic proximity to European markets adds to its appeal,” said the report.
Nigeria ranked ninth most attractive destination overall and scored second highest on economic performance and potential but had poor scores on market accessibility and innovation, economic stability, and investment climate.
Outside the top 10, Kenya had excellent rankings in social and human development and market accessibility and innovation.
Credit: Conrad Onyango, bird story agency.