- Seychelles leads due to its high levels of personal freedom, human development, and a stable economic environment, offering a unique and attractive investment climate.
- Rand Merchant Banks’ report offers a comprehensive analysis of the top investment destinations in Africa in 2024.
- Mauritius, despite its smaller economic size and potential, stands out for its innovation, economic freedom, and high GDP per capita
- Morocco’s strong performance in connectedness, innovation, and economic stability positions it as a top investment destination.
The small island economies of Seychelles and Mauritius have emerged as the most attractive investment destinations on the African continent, ranking first and second, respectively according to a new report. Rand Merchant Banks’ (RMB) 2024 edition of its Where to Invest in Africa report, shows that larger economies of Egypt, South Africa, and Morocco take the third, fourth, and fifth places.
The report offers a comprehensive analysis of the top investment destinations on the continent. Seychelles leads the rankings due to its high levels of personal freedom, human development, and a stable economic environment, offering a unique and attractive investment climate.
Mauritius, despite its smaller economic size and potential, stands out for its innovation, economic freedom, and high GDP per capita, making it a top destination for investors seeking stability and growth opportunities in a well-regulated environment.
Egypt, Africa’s largest economy by GDP in 2023, offers a substantial market with diverse opportunities in technology, manufacturing, and services. Its strategic location and economic complexity have further enhanced its attractiveness.
RMB Chief Economist Isaah Mhlanga, says that the African landscape is diverse and complex continent with different cultures, economies and investment potential.
“Our report therefore is not a definitive guide, but rather it is designed to provide insight to uncover the underlying drivers of a country’s performance that inform its ranking. This offers invaluable insights for investors, policymakers, and business leaders looking to navigate Africa’s dynamic economic landscape,” says Isaah Mhlanga, Chief Economist at RMB.
South Africa, despite significant challenges, remains a crucial hub for investment in Africa. Its robust financial sector, diverse economy, and potential for infrastructure development make it a key player in the investment landscape.
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 for investors.
These rankings highlight the diverse investment opportunities across the continent, from small island nations with stable environments to large economies with substantial market potential.
The report, which has been developed in collaboration with the Gordon Institute of Business Science (GIBS), leverages a robust methodology that has been updated to reflect new data sources, taking into account a variety of factors that have been proven to determine a country’s progress and therefore its investment potential.
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Expanded data, extended granularity
Investment decisions need to be viewed through both an economic performance lens and an operating environment lens. As a result, the methodology used for this edition of the Where to Invest in Africa report builds and expands on previous editions, taking into account new data sets as well as changing geopolitical and macroeconomic climates.
The scorecard for the 2024 issue highlights 31 countries that collectively represent 92 per cent of the continent’s economic activity (measured by GDP), and more than one billion people (three quarters of the continent’s population).
It draws on publicly available data sets from global institutions, including the World Bank, the IMF, the African Development Bank, the United Nations, and the International Labour Organisation.
The model is constructed from 20 metrics across four measurement pillars: economic performance and potential; market accessibility and innovation; economic stability and investment climate; and social and human development.
Each metric is weighted, which translates into a weight for each pillar, and based on these metrics a standardised scorecard is produced, with rankings that enable effective comparison across Africa’s complex and heterogeneous environment.
Top Investment Destinations in Africa in 2024
Africa is an incredibly diverse continent, and no two markets are the same, which means there is no such thing as a universal success story. However, when we zoom out and view nations through the lenses of size and the relevant investability score, it becomes apparent that they fall into distinct groupings with shared traits.
The 2024 edition of Where to Invest in Africa suggests five potential investment archetypes based on shared characteristics revealed through the four measurement pillars.
‘Highflyers’ represent the large, well-established economies that offer stability and a range of investment opportunities, such as Nigeria, South Africa, Egypt and Ethiopia.
Those ‘Cleared for Take-off’ are countries with high economic growth and innovation potential thanks to factors like a young population and abundant resources, including Senegal and Côte d’Ivoire.
‘People Potential’ are markets with a young and growing demographic, creating a sizeable consumer base and a future workforce, such as Kenya, DRC and Uganda.
Trends across the various markets
The report also highlights a number of trends across the various markets, and the role of innovation and economic complexity in driving growth is a central theme.
Countries such as South Africa, Kenya, and Ghana are noted for their strides in technological innovation and diversification of their economic bases, making them attractive destinations for investment.
The African Continental Free Trade Agreement (AfCFTA) holds significant potential for boosting intra-African trade, enhancing economic integration, and creating a more competitive continental market. Effective implementation of the AfCFTA is expected to drive economic growth and development across the continent.
Africa’s young and rapidly growing population also presents a unique opportunity for economic growth, with countries like Ethiopia, Tanzania, and Uganda poised to benefit from this demographic dividend, provided they can create sufficient employment opportunities and foster a conducive environment for economic participation.
In addition, there are a number of emerging markets with significant growth potential, including Nigeria, Ghana, and Kenya.
Despite facing challenges such as political instability and infrastructural deficits, these countries offer substantial opportunities due to their large and youthful populations, improving business climates, and diversification efforts. Africa’s vast natural resources, including minerals and arable land, are pivotal for sustainable economic growth.
However, the report cautions against the “resource curse” and underscores the importance of good governance and strategic management. Angola, Mozambique, and the Democratic Republic of Congo are highlighted for their rich resources and potential for sustainable development.
One area that requires critical attention across the continent is the need for infrastructure investment. Improved transportation, energy, and digital infrastructure are essential for unlocking Africa’s economic potential, and South Africa, Kenya, and Nigeria are identified as key markets where infrastructure development could yield significant returns.
Beyond the rankings – a deeper look at African investment
Looking beyond metrics and scorecards, Africa holds massive potential but equally faces numerous challenges. The continent is rich in natural resources, which can be a major driver of economic growth, but they also present challenges in the form of corruption and environmental degradation.
Increased activity around trade agreements can open new markets for foreign investors and boost economic activity, but lack of adequate infrastructure is a major hurdle for many African economies.
Investment in this space will improve connectivity and create new opportunities, while rapid and increasing urbanisation will prove attractive to investors in consumer goods, retail, and financial services.
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Africa embracing new technologies
Finally, countries in Africa are embracing new technologies, leapfrogging traditional development stages and creating new investment opportunities in the tech sector.
“The richness of Africa’s diversity makes fully analysing its nuance and contrast a challenging task, but an important one when it comes to understanding the varied markets that make up this vast regional economy. The 2024 RMB Where to Invest in Africa report aims to develop a balanced, robust and actionable view of the drivers, challenges and opportunities that characterise each of the 31 African markets included in the analysis,” Mhlanga concludes.
