Ernst & Young’s 2011 Africa attractiveness survey identified 17 African countries that will offer attractive Foreign Direct Investment (FDI) opportunities in the next five years. Insight Group PLC highlights four best performing countries in the ‘Cream of Africa’ Research Report.
The report assesses the current and future economic situation of the top performing countries in Africa, looks at their political situations, market risks and the outlook for the near future.
Mozambique: Mozambique’s key attraction for investors is the recently established natural gas reserves, which already stand at over 127bn cubic metres. Coupled with this, significant improvements are being made to the education system and the country’s infrastructure. According to research by The Economist, Mozambique was one of the 10 fastest-growing economies in the world over the past decade, and this growth is likely to be sustained for the foreseeable future.
South Africa: South Africa’s substantial natural resource endowment will continue to attract investors, and its comparatively well-educated labour force will draw funds into the non-resource sectors of its diverse economy. Furthermore, the domestic market is among the largest in Africa, the population is the richest on average (although extreme income inequality means that many people remain in poverty) and the institutional environment is relatively conducive to business. Despite these overwhelming positives, inflows to South Africa are not expected to be large relative to GDP (around 2% to 2.5%). The economy’s wealth means it can afford to fund much of its own investment, and the country is expected to be a significant source of funds for other African nations over the forecast period.
Zambia: Zambia’s copper mines will continue to attract investors over the forecast period, with global demand expected to keep prices high for the foreseeable future. Outside of the minerals sector, prospects for FDI are less appealing. Zambia’s reliance on copper (which makes it vulnerable to price movements), coupled with its small domestic market, will limit the flow of capital into the rest of the economy. However the country’s business-friendly environment, sound macroeconomic management and investment in the infrastructure network should attract multinational companies into other parts of the economy.
Ethiopia: Research from The Economist shows that Ethiopia was among the 10 fastest growing economies in the world over the past decade. Its gold mines, and the potential to utilise recently found natural gas reserves (currently 25bn cubic metres) will attract significant levels of investment over the next few years. Unfortunately, poor levels of human capital, a small domestic market, underdeveloped infrastructure and high levels of bureaucracy are all barriers to investment outside of natural resources.