where to invest in africa

228 Pages·2016·7.23 MB·English

WHERE TO INVEST
IN AFRICA
A guide to corporate investment
2016 | 2017 EDITION
Authors: Celeste Fauconnier, Nema Ramkhelawan-Bhana,
and Neville Mandimika
Data analyst: Claudell van Aswegen
RRMMBB GGlloobbaall MMaarrkkeettss || B
FOREWORD
RMB is proud to present the sixth edition of
Where to Invest in Africa — A Guide to Corporate Investment.
Best-selling author Ifeanyi Enoch Onuoha said that to fulfil your vision, you must have
hindsight, insight and foresight. In that spirit, our theme for this edition is Back to the
Future as we evaluate Africa’s past progress, present predisposition and future prospects.
A few years ago, Africa was hailed as a thriving investment frontier, boasting economic
growth rates of above 7%. But global events paired with endogenous shocks have led to
uneven rates of growth, altering perceptions and forcing us to take stock of where Africa is
and what the future holds.
Faced with a mountain of challenges, both new entrants and seasoned investors alike are
questioning whether Africa is indeed rising.
The short answer is yes, Africa is still primed for growth but its rate of expansion will
remain slow as countries realign their long-term development strategies to take into
account present realities.
To address investors’ concerns, we plot the investment potential of African economies
using RMB’s Investment Attractiveness rankings — which balances economic activity
against the relative ease of doing business. Our workings are complemented by a number
of highly-regarded global surveys as well as an in-house study which captures the
experiences of Rand Merchant Bank’s clients in Africa.
We find that, despite a challenging macroeconomic backdrop, investment opportunities
are plentiful but require meticulous planning and fortitude.
Governments are gradually coming to the realisation that diversification is necessary to
foster meaningful growth. But transformation cannot be achieved in isolation. Structural
reformation and greater private sector participation are crucial to unlocking Africa’s
potential. Our analysis of sectoral developments — specifically in the spheres of finance,
infrastructure, resources and retail — strongly support this point of view.
The essence of RMB’s brand campaign “Thinking. Pulling. Together.” promotes a path to
collective strength and success in Africa. At RMB, our unique and empowering culture
creates an environment where smart people collaborate and architect solutions for our
clients. We believe that great minds don’t think alike, but when different minds think
together we can navigate through any conditions.
We trust that this year’s edition will reaffirm the belief that the continent still holds
considerable value and look forward to working alongside you as you chart your course
through Africa’s vast investment terrain.
Regards,
Celeste Fauconnier, Nema Ramkhelawan-Bhana and Neville Mandimika
Africa Analysts
Rand Merchant Bank
RMB Global Markets | 1
CONTENTS
CHAPTER 1 Overview 3
CHAPTER 2 Market activity 18
CHAPTER 3 Operating environment 33
CHAPTER 4 Finance 50
CHAPTER 5 Infrastructure 69
CHAPTER 6 Resources 79
CHAPTER 7 Retail 93
CHAPTER 8 Country snapshots 119
CHAPTER 9 Appendices 147
CHAPTER 10 Contact details and disclaimer 221
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CHAPTER 1 O
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OVERVIEW
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TURNING OF THE TIDE ctiv
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Africa is still rising, though not at the feverish pace that once captured international news headlines. Much of the 3
optimism surrounding the hopeful continent was rooted in its ability to stave off global macroeconomic forces eO
and grow from within. But, in many cases, home-grown development strategies have failed to generate self- nviropera
sustaining growth, rendering selected economies vulnerable to exogenous shocks. nmtin
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Arguably, the tapering of Africa’s economic growth rates between 2010 and 2015 were in line with global trends t
(Figure 1.1). But the deceleration in the continent’s GDP growth has been more pronounced in the last two years.
Countries that were believed to be on solid footing buckled under the pressure of flailing resource prices, security 4
disruptions, fiscal imprudence and adverse weather conditions.
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Figure 1.1: Comparison of real GDP growth rates
Figure 1.1: Comparison of real GDP growth rates
%
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While Africa’s prevailing macroeconomic quandary can be ascribed to the past shortcomings of its resource-based sC
economies, its future prospects are bright if the better part of the continent commits to consistent structural reforms. napshoountry
Although perceptions have been altered by recent events, investors still believe there are treasure troves of ts
opportunities waiting to be unearthed across the continent. Seventy-five per cent of respondents to RMB’s survey
on business experiences in Africai said that they were already invested in Africa and plan to invest even further
(Figure 1.2). 9
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When asked to name the most eye-catching investment destinations on the continent, answers varied, reflecting p
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the vastness of the investment terrain. en
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FiFgiugruer e1 .12.:2 D: eDsecrsicprtiipotni oonf boufs binuessisnees’s sinevs’e sintmveesnttm pelannts pwlaitnhs r wegiathrd rse tgoa Ardfrsic tao Africa
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RMB’s Investment Attractiveness Index provides a means with which to discern the most
appealing of these destinations by overlaying macroeconomic fundamentals with the
practicalities of doing business on the continent. Our methodology, which is detailed in 7
the Appendices, is simple but encapsulates what we perceive to be the most important
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elements underpinning investment: economic activity (expressed as a weighted average of ta
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market size and forecasted levels of GDP growth) and the operating environment.
Rather than evaluating the continent at a point in time, we sought to highlight its
structural evolution by mapping its progress over the last decade. In each of the
subsequent chapters we compare current realities to past occurrences to better
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understand the aspects that will shape future events.
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TOP TEN — THE MORE THINGS CHANGE THE MORE THEY STAY THE SAME
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The face of our top ten is remarkably similar to last year, reminding us that the more things change the more they eng
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stay the same (Figure 1.3). However, there is one noticeable difference — Côte d’Ivoire re-enters the fold after a
13-year hiatus, squeezing Tunisia out of the top ten.
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Figure 1.3: RMB’s ten most attractive investment destinations in Africa (rank, where 1 = best) a
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Figure 1.3: RMB’s top ten most attractive investment destinations in Africa (where 1 = best) c
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Source: RMB Global Markets
• South Africa continues to stand firm at number one but risks losing its coveted spot in the next few years
as a faltering growth outlook and uncertain business environment slowly eats away at its investment score.
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Despite a stream of negative news, the country remains a bastion of institutional integrity and continues to
boast one of the best operating environments in Africa. sC
• Egypt could unseat South Africa as the leading investment destination in Africa if it succeeds in consolidating napshoountry
the economic gains accumulated in the aftermath of the Arab Spring. However, the country’s operating ts
environment could be an inhibiting factor considering that it lags South Africa in all aspects of governance
(Figure 1.4).
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The face of our top ten is remarkably nd
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similar to last year, with one noticeable
difference – Côte d’Ivoire enters the fold.
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• Morocco is hot on the heels of its North African peer, holding steady at number three for a second c
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consecutive year, buoyed by solid economic growth, favourable geographic positioning, sturdy infrastructure,
strong regulatory policies and a stable political setting.
• Ghana remains within a whisker of the top three, brandishing the title as the most attractive investment
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destination in West Africa. Despite a myriad of economic challenges, the country labours on as it slowly
rebuilds confidence in its processes and policies under the watchful eye of the IMF. In
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• Kenya has seized fifth spot. It is an exceptionally worthy recipient which has steadily progressed up the ranks, stru
surpassing both Ethiopia and Tanzania. Investors are attracted by Kenya’s relatively diverse economy, ctu
pro-market policies and brisk growth in consumer spending. re
• Nigeria slips to number six, a position it last held in 2011, weighed down by a dismal economic growth
outlook and weak operating environment. Despite its many challenges, the West African giant is still regarded 6
as a viable long-term investment destination but will be forced to endure painful structural adjustments over R
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the next few years to safeguard its prospects. o
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• Ethiopia might well surpass Nigeria in 2017 as scores of foreign investors seek to benefit from the country’s es
young and vibrant population, low unit labour costs and thriving manufacturing sector. Notwithstanding the
regulatory challenges in establishing operations locally, the opportunity to participate in this budding economy
cannot be overlooked.
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• Côte d’Ivoire — the unsung hero of West Africa — debuts at number eight. After years of political paralysis, R
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the world’s top cocoa producer has earned its place in the sun, supported by a booming economy, an ta
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emerging middle class, robust infrastructure development and an improved business environment.
• Having flirted with the top ten for many years, Tanzania holds steady at number nine, barely nudging out
Algeria and Tunisia. The new political dispensation’s focus on industrialisation and enhanced productivity is
encouraging, though protectionist tendencies could undermine the government’s pro-business rhetoric.
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• Algeria slides two spots to number ten. High reserves and low debt levels have helped to cushion the blow sC
ohfy dlorowc aoribl opnri cseesc,t bour. t there is a desperate need to implement reforms to diversify the economy away from the napshoountry
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Performances outside of the top ten do not go unnoticed. Notable advancements in the rankings include Senegal
(up five spots to 17), Cameroon (three spots to 20), Togo (three spots to 35), Swaziland (four spots to 36) and
Sierra Leone (four spots to 38).
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Table 1.1: Comparison of the most attractive destinations in Africa O
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Investment Attractiveness Index
2016 rank1 2015 rank Country 2016 score 2015 score What has improved?2 What has deteriorated?2
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1 1 South Africa 6.27 6.54
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2 2 Egypt 6.21 6.23 a
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3 3 Morocco 6.04 6.18 e
4 4 Ghana 5.71 5.92 t ac
5 10 Kenya 5.68 5.43 Operating environment tivity
6 5 Nigeria 5.67 5.89 Economic activity
7 6 Ethiopia 5.63 5.67
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8 15 Côte d'Ivoire 5.57 5.15 Operating environment
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109 89 ATalgnezarinaia 55..5504 55..5499 nviropera
11 7 Tunisia 5.50 5.65 nmenting
12 11 Rwanda 5.43 5.36 t
13 13 Botswana 5.42 5.24 Economic activity
14 14 Mauritius 5.33 5.20 Economic activity Operating environment
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15 16 Uganda 5.22 4.89 Operating environment
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16 12 Zambia 5.20 5.31 Economic activity in
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17 22 Senegal 5.01 4.54 Economic activity n
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18 18 Namibia 4.88 4.83 Operating environment
19 17 Mozambique 4.79 4.85 Operating environment
20 23 Cameroon 4.55 4.50
21 20 Libya 4.54 4.63
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22 24 Burkina Faso 4.48 4.26
23 19 Angola 4.46 4.67 Economic activity In
24 26 Mali 4.45 4.14 fras
25 21 Gabon 4.28 4.61 Operating environment tru
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26 25 Madagascar 4.23 4.19 ture
27 28 Benin 4.17 3.92
28 27 DRC 4.03 4.12
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29 31 Niger 3.92 3.76
30 29 Cabo Verde 3.85 3.77 R
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31 30 Seychelles 3.83 3.76 Operating environment o
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32 33 Sudan 3.81 3.73 rce
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33 35 Malawi 3.79 3.63 Economic activity and
operating environment
34 32 Lesotho 3.68 3.76 Economic activity and
operating environment
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35 38 Togo 3.60 3.51 Operating environment
36 40 Swaziland 3.57 3.42 Operating environment Re
37 39 Guinea 3.56 3.50 Operating environment tail
38 42 Sierra Leone 3.54 3.33 Economic activity
39 46 Zimbabwe 3.51 3.24
40 41 Djibouti 3.39 3.41
41 45 Liberia 3.37 3.25
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42 34 Chad 3.37 3.67 Economic activity
444543 343647 GBMuaarmuurnbitdiaainia 333...023970 333...525764 Operating environment Economic activity snapshoCountry
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46 47 São Tomé and Príncipe 3.09 2.99
47 43 Congo 3.02 3.29
48 49 Eritrea 2.94 2.54 Economic activity and
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49 52 Guinea-Bissau 2.61 2.34
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50 48 CAR 2.61 2.57 p
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51 51 Comoros 2.60 2.49 n
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52 50 South Sudan 2.32 2.54 ic
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53 53 Equatorial Guinea 2.21 2.26
Note:
1. Green depicts improvement, red depicts deterioration.
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2. An improvement or deterioration is noted when the change in a country’s economic activity and operating environment scores both exceed or fall short of the 0
sample’s standard deviations. A blank cell implies that either one or both of the indicators did not meet the criteria.
3. Somalia lacked sufficient data to be rated. anCo
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