Africa’s investment environment for both businesses and financial investors is now reviving, with continued improvement in the trade-off between risk and reward as growth on the continent rebounds.
This is according to the latest edition of the ‘Africa Risk-Reward Index’ from Control Risks and Oxford Economics.
Rwanda was highlighted among the countries where investment climate is likely to strengthen in the next decade, despite being a smaller market for investors.
The report particularly singled out Rwanda as a country where mismanagement, burdensome procedures and corruption are rarely encountered, leaving the country with a risk score of 5.07 – the lowest in East Africa.
It predicts that growth and investment prospects will remain positive.
It added that Rwanda’s sustained economic growth and a robust private sector will reduce the country’s susceptibility to exogenous shocks over the medium term.
After several years of political and economic turbulence, with the weakest growth since the early 90’s, the report now projects an accelerating resurgence in growth in Sub-Saharan Africa to the end of the decade that will see strengthening investment returns versus risk.
The continent’s GDP growth is forecast to climb to 3.7 per cent next year, a rebound from 2.9 per cent this year and 2.6 per cent in 2017.
“By 2020, the growth should reach a buoyant 4.3 per cent,” the report says.
The Africa Risk-Reward Index findings highlight how the recovery in sub-Saharan Africa’s outlook is not being driven by the “usual suspects” of the region’s major economies, notably Nigeria and South Africa.
Along with Angola, the index finds that Nigeria and South Africa have seen only minor improvements in the risk-reward trade-off since the last report in June.
This chimes with recent warnings from the International Monetary Fund (IMF) that poor relative performance by these economies is holding back the wider African economy.
“The far-reaching political change occurring across swaths of sub-Saharan Africa since late 2017 have seen reform agendas being pushed by new leaders in countries such as Angola and Ethiopia that represent broadly positive steps towards future growth,” the report noted.
However, the report finds that only in Zimbabwe have the current wave of reforms yet led to significant improvements in the risk-reward scores.
Barnaby Fletcher, senior analyst at Control Risks comment, said since the first edition of the Africa Risk-Reward Index, the continent has seen dramatic political changes.
“However, what we are seeing is that ambitious rhetoric from new leaders is no substitute for solid structures and sensible policies built up over many years. Obtaining an understanding of an investment destination that goes beyond the headlines is therefore crucial,” he noted in a statement.
This third edition of the Africa Risk-Reward Index explores the impact of current and future political change in more detail, focusing on recent and upcoming elections in Congo (DRC), Nigeria and Gabon, and their potential impact.
The index also considers prospects in Tunisia, which has struggled to fully recover from the Jasmine Revolution of 2011, but where there are some early signs that the ambitious reform agenda pursued by the government is starting to have a positive impact.