Wtiia 2016 2017

Where to invest
in Africa
2016 | 2017 edition
A guide to corporate investment

Authors: Celeste Fauconnier, Nema Ramkhelawan-Bhana,
and Neville Mandimika
Data analyst: Claudell van Aswegen
BRMB Global Markets |RMB Global Markets |

Foreword
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 is proud to present the sixth edition of
Where to Invest in Africa — A Guide to Corporate Investment.
1RMB Global Markets |

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

Overview
“The present defines the
future. The future builds on
the foundation of the past”
– Lailah Gifty Akita
chapter 1
3Operating
environment5Infrastructure
7Retail
9Appendices
2Marketactivity
4Finance
6Resources
8Country
snapshots10Contactdetails
anddisclaimer1Overview

Turning of the tide
Africa is still rising, though not at the feverish pace that once captured international news headlines. Much of the
optimism surrounding the hopeful continent was rooted in its ability to stave off global macroeconomic forces
and grow from within. But, in many cases, home-grown development strategies have failed to generate self-
sustaining growth, rendering selected economies vulnerable to exogenous shocks.
Arguably, the tapering of Africa’s economic growth rates between 2010 and 2015 were in line with global trends
(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
disruptions, fiscal imprudence and adverse weather conditions.
Figure 1.1: Comparison of real GDP growth rates
Advanced economies Latam and the Caribbean
EM and developing economies SSA
Emerging and developing Asia North Africa
Emerging and developing Europe World
Source: IMF
While Africa’s prevailing macroeconomic quandary can be ascribed to the past shortcomings of its resource-based
economies, its future prospects are bright if the better part of the continent commits to consistent structural reforms.
Although perceptions have been altered by recent events, investors still believe there are treasure troves of
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).
When asked to name the most eye-catching investment destinations on the continent, answers varied, reflecting
the vastness of the investment terrain.
Figure 1.1: Comparison of real GDP growth rates
%
0
2
4
6
8
10
1980-1990 1990-2000 2000-2010 2010-2016 2016-2021
Advanced economies
EM and developing economies
Emerging and developing Asia
Emerging and developing Europe
Source: IMF
Latam and the Caribbean
SSA
North Africa
World
i
RMB’s Global Markets Africa Survey was carried out in June 2016.
3Operating
7Retail
9Appendices
2Marketactivity
4Finance
6Resources
8Country

Figure 1.2: Description of businesses’ investment plans with regards to Africa
We are already invested in Africa and plan to invest even more
We are already invested in Africa and do not plan to invest more
We are not invested in Africa but plan to invest
We are not invested in Africa but do not plan to invest
Source: RMB Global Markets
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
the Appendices, is simple but encapsulates what we perceive to be the most important
elements underpinning investment: economic activity (expressed as a weighted average of
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
understand the aspects that will shape future events.
Figure 1.2: Description of businesses’ investment plans with regards to Africa
75%
15%
6%
4%
We are already invested in Africa and plan to invest even more
We are already invested in Africa but do not plan to invest more
We are not invested in Africa but plan to invest
We are not invested in Africa and do not plan to invest
3Operating
7Retail
9Appendices
2Marketactivity
4Finance
6Resources
8Country

Figure 1.3: RMB’s top ten most attractive investment destinations in Africa (where 1 = best)
2016
2015
0
3
6
9
12
15
SouthAfrica
Egypt
Morocco
Ghana
Kenya
Nigeria
Ethiopia
Côted'Ivoire
Tanzania
Algeria
Top ten — the more things change the more they stay the same
The face of our top ten is remarkably similar to last year, reminding us that the more things change the more they
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.
Figure 1.3: RMB’s ten most attractive investment destinations in Africa (rank, where 1 = best)
2016
2015
• 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.
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.
• Egypt could unseat South Africa as the leading investment destination in Africa if it succeeds in consolidating
the economic gains accumulated in the aftermath of the Arab Spring. However, the country’s operating
environment could be an inhibiting factor considering that it lags South Africa in all aspects of governance
(Figure 1.4).
The face of our top ten is remarkably
similar to last year, with one noticeable
difference – Côte d’Ivoire enters the fold.
3Operating
7Retail
9Appendices
2Marketactivity
4Finance
6Resources
8Country

Figure 1.4: Aspects of governance (where 2.5 = strong; -2.5 = weak)
South Africa
Egypt
Source: World Bank
• Morocco is hot on the heels of its North African peer, holding steady at number three for a second
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
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.
• Kenya has seized fifth spot. It is an exceptionally worthy recipient which has steadily progressed up the ranks,
surpassing both Ethiopia and Tanzania. Investors are attracted by Kenya’s relatively diverse economy,
pro-market policies and brisk growth in consumer spending.
• 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
as a viable long-term investment destination but will be forced to endure painful structural adjustments over
the next few years to safeguard its prospects.
• Ethiopia might well surpass Nigeria in 2017 as scores of foreign investors seek to benefit from the country’s
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.
• Côte d’Ivoire — the unsung hero of West Africa — debuts at number eight. After years of political paralysis,
the world’s top cocoa producer has earned its place in the sun, supported by a booming economy, an
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.
• Algeria slides two spots to number ten. High reserves and low debt levels have helped to cushion the blow
of low oil prices, but there is a desperate need to implement reforms to diversify the economy away from the
hydrocarbon sector.
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).
Figure 1.4: Aspects of governance (where 2.5 = strong; -2.5 = weak)
South Africa
Egypt
Source: World Bank
-1.0
-1.5
-0.5
0.0
0.5
1.0
Voice and
accountability
Political stability and
absence of violence/
terrorism
Government
effectiveness
Regulatory
quality
Rule of law Control of
corruption
3Operating
7Retail
9Appendices
2Marketactivity
4Finance
6Resources
8Country

Table 1.1: Comparison of the most attractive destinations in Africa
Investment Attractiveness Index
2016 rank1
2015 rank Country 2016 score 2015 score What has improved?2
What has deteriorated?2
1 1 South Africa 6.27 6.54
2 2 Egypt 6.21 6.23
3 3 Morocco 6.04 6.18
4 4 Ghana 5.71 5.92
5 10 Kenya 5.68 5.43 Operating environment
6 5 Nigeria 5.67 5.89 Economic activity
7 6 Ethiopia 5.63 5.67
8 15 Côte d'Ivoire 5.57 5.15 Operating environment
9 9 Tanzania 5.54 5.49
10 8 Algeria 5.50 5.59
11 7 Tunisia 5.50 5.65
12 11 Rwanda 5.43 5.36
13 13 Botswana 5.42 5.24 Economic activity
14 14 Mauritius 5.33 5.20 Economic activity Operating environment
15 16 Uganda 5.22 4.89 Operating environment
16 12 Zambia 5.20 5.31 Economic activity
17 22 Senegal 5.01 4.54 Economic activity
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
22 24 Burkina Faso 4.48 4.26
23 19 Angola 4.46 4.67 Economic activity
24 26 Mali 4.45 4.14
25 21 Gabon 4.28 4.61 Operating environment
26 25 Madagascar 4.23 4.19
27 28 Benin 4.17 3.92
28 27 DRC 4.03 4.12
29 31 Niger 3.92 3.76
30 29 Cabo Verde 3.85 3.77
31 30 Seychelles 3.83 3.76 Operating environment
32 33 Sudan 3.81 3.73
33 35 Malawi 3.79 3.63 Economic activity and
operating environment
34 32 Lesotho 3.68 3.76 Economic activity and
35 38 Togo 3.60 3.51 Operating environment
36 40 Swaziland 3.57 3.42 Operating environment
37 39 Guinea 3.56 3.50 Operating environment
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
42 34 Chad 3.37 3.67 Economic activity
43 37 Mauritania 3.30 3.54 Operating environment Economic activity
44 44 Burundi 3.27 3.26
45 36 Gambia 3.09 3.57
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
49 52 Guinea-Bissau 2.61 2.34
50 48 CAR 2.61 2.57
51 51 Comoros 2.60 2.49
52 50 South Sudan 2.32 2.54
53 53 Equatorial Guinea 2.21 2.26
Note:
1. Green depicts improvement, red depicts deterioration.
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
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.
3Operating
7Retail
9Appendices
2Marketactivity
4Finance
6Resources
8Country

Top twenty — now and then
By contrasting the scores of Africa’s most attractive investment destinations for 2016 with their relative positions
in 2006 and 2011, we can single out Africa’s underachievers and outperformers (Figure 1.5).
Seven countries registered weaker investment scores. The differences are negligible for Nigeria, Tanzania and
Algeria but obvious in the case of Cameroon, which deteriorated markedly between 2011 and 2016. Despite
a persistent weakening in its score, South Africa continues to hold its own as the most attractive investment
destination in Africa, buttressed by strong governance relative to its African peers.
Ten of this year’s top 20 have registered a more than 0.5 percentage point (ppt) improvement in their scores over
the last decade. Côte d’Ivoire and Rwanda’s scores stand out, having improved by more than 2ppt while Zambia
and Senegal’s metrics experienced a more than 1ppt rise.
Figure 1.5: Relative performance of the top 20 most attractive investment destinations at
specific intervals1
2006
2011
2016
Note:
1. Dark green boxes highlight a tangible deterioration, while the light green boxes represent an appreciable improvement.
Figure 1.5: Relative performance of the top 20 most attractive investment destinations at speciﬁc intervals1
2006
2011
2016
Note:
1. Dark green boxes highlight a tangible deterioration, while the light green boxes represent an appreciable improvement
0
2
4
6
8
10
Egypt
SouthAfrica
Morocco
Ghana
Kenya
Nigeria
Ethiopia
Côted'Ivoire
Tanzania
Algeria
Tunisia
Rwanda
Botswana
Mauritius
Uganda
Zambia
Senegal
Namibia
Mozambique
Cameroon
3Operating
7Retail
9Appendices
2Marketactivity
4Finance
6Resources
8Country

Figure 1.6: Africa through the sands of time
Changes in global rankings
Our global investment attractiveness scores for 191 jurisdictions allow us to measure Africa’s relative performance.
Africa is still at the lower end of the global spectrum. A large proportion of African countries are still ranked
between 120 and 191 despite positive developments in a number of investment destinations in recent years
(Figure 1.7). South Africa, the only African country to have featured in the top 40 in 2006, has dropped to 45,
surpassed by a number of emerging economies in East Asia and Latin America.
Figure 1.7: Number of African countries ranked within each global bucket1
Note:
1. The sum of the buckets in 2006 and 2016 are less than 54 as Somalia is not ranked in either year and South Sudan only gained
independence in 2011.
Figure 1.6: Africa through the sands of time
Ten countries have gained
between ﬁve and ten places
while seven countries have
jumped more than ten spots
between 2006 and 2016
Côte d’Ivoire and Zambia,
which were ranked 35 and
38 respectively in 2006,
now feature prominently
within our top 16
Seven countries have
slipped more than ten
places. Cameroon
descended from number
two in 2006 to 20 in 2016
Libya remains the
lowest ranked country
in North Africa
Nigeria has swung
between second and sixth
position in the last ten
years. Barring the period
between 1997 and 2002,
it has always placed in the
top ten
Senegal features in the
top 20 for the ﬁrst time
in more than two decades
North and East African
economies have been
well represented in the
top 20 since 2006
Southern African
economies have struggled
to keep pace with their
East African counterparts
10
N
E
E
S
20
8 16
07
Figure 1.7: Number of African countries ranked within each global bucket1
2006
1 – 40
1
40 – 80 80 – 120 120 – 160 160 – 200
9 18 16
2016
Note
1. The sum of the buckets in 2006 and 2016 are less than 54 as Somalia is not ranked in either year and South Sudan
only gained its independence in 2011.
1 – 40
0
40 – 80 80 – 120 120 – 160 160 – 200
10 11 21 11
8
3Operating
7Retail
9Appendices
2Marketactivity
4Finance
6Resources
8Country

sidebar 1.1: Risky business — the relative importance of credit risk
We have long held that our investment attractiveness scorings are neither an indication of a country’s
creditworthiness nor RMB’s willingness to extend credit for investment purposes into a particular jurisdiction.
While our primary scorings are similar to sovereign credit ratings, in that they provide investors with insight
into the level of risk associated with investing in a particular country, our methodology is more attuned to the
practicalities of doing business. It is apparent from our in-house survey that the nature of a country’s operating
environment is a greater determinant in shaping a firm’s decision on whether to invest than a country’s credit
rating (Figure 1.8). Only one respondent in the services sector singled it out as a primary driver, while less than 7%
identified it as a more important factor than the ease of doing business.
Figure 1.8: Factors important in determining where to invest
We have compared our investment attractiveness scores with those implied by sovereign ratings to understand
the nuances between the two.
Figure 1.8: Factors important in determining where to invest
0
20
40
60
80
100
Macroeconomic and
political stability
Economic growth Ease of doing business Size of the economy
(in US dollar terms)
Sovereign credit
rating
% of respondents
While our primary scorings are similar to
sovereign credit ratings, our methodology
is more attuned to the practicalities of
doing business.
3Operating
7Retail
9Appendices
2Marketactivity
4Finance
6Resources
8Country

Filling in the gaps
To date, only 27 African economies have obtained sovereign credit ratings, limiting the extent to which they can
be used for comparative purposes. However, literature suggests that a handful of well-defined macroeconomic
variables capture a large portion of the information that is used in assigning a country-specific rating. Using a
blend of indicators, we have formulated a model that extrapolates scores for African economies that have not
been officially assessedi
.
Our model implies speculative grade investment scores for 46 African economies. Thirty-six of these are rated in the
‘B’ category, which broadly tallies with the assessments of S&P, Moody’s and Fitch as at June 2016 (Figure 1.9).
Figure 1.9: The number of African sovereigns per credit ratings buckets (actual versus implied)1
Actual
Implied
Note:
1. Actual sovereign credit ratings as at June 2016.
Source: IMF, EIU, S&P, Fitch, Moody’s, RMB Global Markets
Five economies (Guinea, Eritrea, Guinea-Bissau, South Sudan and Zimbabwe) have implied scores between 17
and 20, implying ratings of between CCC and D by S&P and Fitch or Caa2 and C by Moody’s. South Sudan and
Zimbabwe fall within the C ratings bucket, reflecting the poorest credit quality.
Of our ten most attractive destinations in Africa, Tanzania is the only economy that has not attained a formal
ratingii
. It has traditionally relied on non-concessional loans, but plans are underway to issue a sovereign bond
once a rating has been assigned. The country stands to benefit from robust GDP growth and single-digit inflation,
yet is plagued by corruption, an escalating debt-to-GDP ratio and a widening current account deficit, which points
to a ‘B+’ rating, on par with Côte d’Ivoire, Gabon, Kenya, Lesotho, Nigeria and Rwanda.
Figure 1.9: The number of African sovereigns per credit ratings buckets (actual versus implied)1
0
2
4
6
8
10
12
AAA
AA+
AA
AA-
A+
A
A-
BBB+
BBB
BBB-
BB+
BB
BB-
B+
B
B-
CCC+
CCC
CCC-
CC
C
D
Note:
1. Actual sovereign credit ratings as at June 2016
Source: IMF, EIU, S&P, Fitch, Moody’s, RMB Global Markets
Actual
Implied
Investment grade Sub-investment grade
i
For further information on the working of the model, please refer to https://grid.rmb.co.za.
ii
Algeria is formally rated as BB by the EIU.
3Operating
7Retail
9Appendices
2Marketactivity
4Finance
6Resources
8Country

Facing off
When juxtaposed against credit ratings, our investment attractiveness scores reveal an interesting truth.
The capacity to repay sovereign or corporate debt subtracts very little from a country’s overall investment
attractiveness (Figure 1.10) as structural measures can be adopted to minimise the risk.
Figure 1.10: Investment attractiveness scores versus implied credit ratings scores (where 1 = best)
Investment attractiveness score
Implied credit ratings score
Figure 1.10: Investment attractiveness scores versus implied credit ratings scores (where 1 = best)
Investment attractiveness score
Implied credit ratings score
0
2
4
6
8
10
SouthAfrica
Egypt
Morocco
Ghana
Kenya
Nigeria
Ethiopia
Côted'Ivoire
Tanzania
Algeria
The capacity to repay sovereign or corporate
debt subtracts very little from a country’s overall
investment attractiveness.
3Operating
7Retail
9Appendices
2Marketactivity
4Finance
6Resources
8Country

Foreign Direct Investment trends — a trickle rather than a torrent
Africa’s 2015 FDI profile somewhat mimicked its performance in 2010. In both years, the continent attracted
roughly US$55bn in inflows and accounted for 3.1% of global flows (Figure 1.11).
Figure 1.11: FDI inflows
Above US$3bn
US$2bn to US$2.9bn
US$1bn to US$1.9bn
US$0.5bn to US$0.9bn
Below US$0.5bn
Source: UNCTAD, RMB Global Markets
Inflows
Notwithstanding a similarly-sized pool of funds in 2010 and 2015, the regional distribution of inflows differed
markedly (Figure 1.12). Prior to the Arab spring, North Africa accounted for almost one third of the continent’s
inflows, while in 2015, the greatest proportion of monies was channelled into Southern Africa. Whereas East Africa
captured a modest percentage of flows at the turn of the decade, it was virtually on par with West Africa in 2015.
Despite uninspiring levels of FDI growth in 2015, Africa continued to magnetise more investment than South and
West Asia, Oceania and economies in transition. Liberalisation measures and planned privatisations of state-
owned enterprises should induce modest gains in 2016, though global interests are likely to be depressed owing
to muted levels of economic growth in many parts of the world.
Figure 1.11: FDI inflows
Above US$3bn
US$2bn to US$2.9bn
US$1bn to US$1.9bn
US$0.5bn to US$0.9bn
Below US$0.5bn
Africa attracted
US$55bn in inflows in
2010, 9% lower than
the previous year,
amounting to 3.1%
of global FDI
Africa attracted
US$54bn in inflows in
2015, 7.2% lower than
the previous year,
amounting to 3.1%
of global FDI
2010 2015
3Operating
7Retail
9Appendices
2Marketactivity
4Finance
6Resources
8Country

Outflows
Africa’s investments abroad grew substantially between 2010 and 2014 but tapered in 2015 – South African,
Nigerian and Angolan investors shrunk their investment portfolios abroad owing to weak commodity prices,
anaemic demand from primary trading partners and currency weakness.
Over the years, Southern Africa, and more specifically South Africa, has assumed the role as the continent’s
principal investor among its regional peers. A sizeable reduction in South Africa and Angola’s offshore investments
resulted in a 70% decline in total outflows in 2015.
Figure 1.12: FDI flows per region
North Africa
East Africa
West Africa
Southern Africa
Central Africa
Source: IMF
Figure 1.12: FDI flows per region
FDI outflowsFDI inflows
North Africa
East Africa
West Africa
Southern Africa
Central Africa
0
12
24
36
48
60
2010 2011 2012 2013 2014 2015
US$
0
4
8
12
16
20
2010 2011 2012 2013 2014 2015
US$
Source: IMF
3Operating
7Retail
9Appendices
2Marketactivity
4Finance
6Resources
8Country

Pinpointing primary destinations — country trends
Angola, Egypt, Mozambique, Ghana and Morocco accounted for the lion’s share of FDI inflows in 2015 (Figure 1.13).
Figure 1.13: Top five recipients of FDI in 2015
Figure 1.14: Top five recipients of FDI in 2015
After several years
of negative flows,
Angola returned to the
top spot in 2015,
attracting a record of
US$8.7bn in inflows.
This seems rather
counterintuitive in the
context of lower oil
prices, a weaker
currency and rampant
inflation. However,
the nature of the
investment was largely
skewed toward loans
provided to local
affiliates by their
foreign parents.
This should not detract
from the greenfield
investment in
energy-related
infrastructure, such as
Puma Energy’s
conventional buoy
mooring system in
Luanda Bay.
The expansion of
foreign affiliates in
the financial and
pharmaceutical
industries as well as
substantial injections
into telecommunica-
tions and the gas
industry underpinned
Egypt’s 49% y/y
increase in FDI.
Despite a dramatic
slowdown in the
rate of growth in FDI,
owing to low gas
prices, election-
related uncertainties
and a sizeable
disinvestment by Anglo
American, Mozambique
was the third largest
recipient of funds last
year.
Intra-African FDI proved
to be Mozambique’s
saving grace, with
multinational
organisations such
as Sasol expanding
their activities.
As the second largest
cocoa exporter in
Africa, Ghana is a
breeding ground for
foreign investment in
agriculture. Elevated
cocoa prices incentiv-
ised FDI which totalled
US$3.2bn in 2015.
Perceived as the
Mediterranean’s
gateway to Africa,
Morocco continues to
draw considerable FDI.
It was one of six
countries to attract
more than US$3bn in
inflows last year, with
sizeable investments
in its robust manufac-
turing and real estate
sectors.
MOROCCOANGOLA EGYPT MOZAMBIQUE GHANA
3Operating
7Retail
9Appendices
2Marketactivity
4Finance
6Resources
8Country

Chief investors honing in on Africa
In keeping with historical trends, developed markets led investment flows in Africa in 2015. The UK outshone
the US and France, registering a total FDI stock of US$66bn (Figure 1.14). Emerging markets are acquiring an eye
for African investments. Five of the continent’s top ten investors in 2015 hailed from emerging economies, with
China’s investments more than doubling since 2009.
Figure 1.14: Top ten investors by FDI stock in 2015
UNCTAD believes that North and East Africa will present the highest number of investment opportunities
in 2016. Greenfield project announcements suggest that infrastructure (i.e. electricity, gas and water,
construction, and transport) will attract a large proportion of FDI followed by manufacturing industries.
Figure 1.13: Top ten investors by FDI stock in 2015
1.
UK
US$66bn
2.
US
US$64bn
3.
France
US$52bn
4.
China
US$32bn
5.
SA
US$26bn
6.
Italy
US$19bn
7.
Singapore
US$17bn
8.
India
US$15bn
9.
Malaysia
US$14bn
10.
Germany
US$13bn
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Foreword
Market activity
The narrative on Africa
is changing from one of
unbridled optimism to
sobering realism as the
continent navigates its way
through stormy global waters.
chapter 2
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Africa’s near-term economic
growth outlook is littered with
risks but the continent will
bear fruit to those willing to
take a long-term view.
From unbridled optimism to sobering realism
An uneven recovery in commodity prices, stricter financing conditions and adverse weather
patterns have forced many economies to reassess their structural underpinnings. Faced
with rapidly depleting fiscal and foreign exchange reserves, constrained international
financing and an understanding that resource prices could remain lower for longer,
commodity exporters are at pains to initiate timely and coordinated policy responses to
ensure quick, durable and more inclusive levels of growth. The International Monetary
Fund (IMF) believes that fiscal consolidation, improved domestic revenue mobilisation,
careful public investment and sharper governance are necessary preconditions to prevent
disorderly adjustments.
However, the slow upturn in commodity prices is as much a boon as it is a burden to
Africa. A host of non-resource reliant economies, particularly in East Africa, are primed for
growth on account of a strengthening in their respective terms of trade. This has allowed
policymakers to focus their efforts on enacting polices that will cushion their economies
from a sudden worsening in the economic climate.
In this chapter, we get the true measure of the continent by plotting its economic
evolution from two distinct points of view: market size and forecasted levels of GDP
growth. Together, these indicators form the basis of our economic activity variable that
accounts for 50% of our total attractiveness score. Given that Africa missed a number of
the Millennium Development Goals (MDGs), we question whether the continent’s growth
story still holds water by assessing the degree of its structural transformation.
We find that though Africa’s near-term growth outlook is littered with risks, the
continent will bear fruit to those willing to take a long-term view on its ability to adapt
to changing circumstances.
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Market size — that’s about the size of it
Figure 2.1: Africa’s many shapes and sizes
Source: IMF, RMB Global Markets
Figure 2.1: Africa’s many shapes and sizes
Africa’s giantsSum of Africa’s parts (number of countries per bucket)
2011
US$3.1 trillion
2016
US$6.0 trillion
US$1,000bn + 0 2
US$500bn – US$1,000bn 2 2
US$200bn – US$500bn 2 1
US$100bn – US$200bn 3 7
US$50bn – US$100bn 5 6
US$30bn – US$50bn 4 9
US$10bn – US$30bn 19 14
US$0bn – US$10bn 19 13
2011 2016
% of Africa’s total market size
Morocco
Algeria
South Africa
Egypt
Nigeria
0 5 10 15 20
2011 2016
Africa’s total market size has almost doubled
in a space of ﬁve years
2016
US$6.0 trillion
2014
US$4.0 trillion
2011
US$3.1 trillion
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At US$6.1 trillion, Africa’s combined GDP (measured in US$ PPP terms) is almost 20% greater than that of
emerging and developing Europe and accounts for 5.1% of the world’s GDP. The continent’s share of the global
pie has increased by 1.8ppt since 2011, accentuating its commercial vibrancy despite a slowdown in growth in
recent years.
Almost 60% of Africa’s GDP is generated by Nigeria, Egypt, South Africa and Algeria. In 2011, South Africa was
considered as the largest economy on the continent. It relinquished that title to Nigeria in 2012, following the
rebasing of the oil producer’s GDP which occasioned an almost doubling of its market size. Rather than taking up
second spot, South Africa slipped to third owing to expeditious growth in Egypt’s nominal GDP. At US$735bn,
it remains a formidable player on the continent, boasting a more developed and diverse economy than its North
and West African peers. However, it risks being usurped by Algeria which doubled the size of its economy in a
matter of five years. The periodic rebasing of countries’ national accounts could result in a reordering of Africa’s
economic hierarchy over the next few years. World Economics asserts a number of changes in the pecking order if
several countries update their base years to 2013: Egypt could drive Nigeria into second place, Sudan would likely
streak past Angola, while Tanzania could just pip Kenya as East Africa’s biggest economy.
By 2011 only three African countries, other than the continental giants, boasted economies greater than
US$100bn. This number has more than doubled, with 12 economies now valued at more than US$100bn.
Economic growth — quick, quick, slow
In 2011, the IMF anticipated that sub-Saharan Africa (SSA) would grow at an average of 5.4% for the next five
years (Figure 2.2).
Figure 2.2: IMF’s 2011 baseline projections for SSA growth vs. actual GDP growth
Actual
Expected
Source: IMF
Figure 2.2: IMF's 2011 baseline projections for SSA growth vs. actual GDP growth
Source: IMF
Actual
Expected
0.0
1.2
2.4
3.6
4.8
6.0
2011 2012 2013 2014 2015
%
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Actual growth rates differed by an average of 0.9ppt from the IMF’s baseline projections, with the most
pronounced deviations in 2012 and 2015 (Figure 2.3).
Figure 2.3: Actual vs. forecasted levels of SSA growth since 20111
Actual c. 2014
c. 2011 c. 2015
c. 2012 c. 2016
c. 2013
Note:
1. ‘c’ denotes estimates of baseline projections for the current year and five periods thereafter.
Between 2012 and 2014, the IMF revised its growth forecasts for each year in question (i.e. its estimate for time t
in period t) lower by an average of 0.85ppt. In 2015, it pared back its annual forecast by 1.9ppt and followed suit
in April 2016 by lowering its baseline projection for the year by 1.3ppt.
While the near-term outlook for SSA is shrouded in uncertainty, medium-term prospects remain favourable,
with an estimated return to 5% growth by 2021. However, the IMF has consistently overestimated GDP growth,
suggesting that the region might grow at a slower pace than anticipated.
Actual
c.2011
c.2012
c.2013
Figure 2.3: Actual vs. forecasted levels of growth since 20111
Note:
1. ć`. denotes estimates of baseline projections for the current year and five periods thereafter
0.0
1.4
2.8
4.2
5.6
7.0
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
%
c.2014
c.2015
c.2016
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Table 2.1: Regional tops and tails
Region
Average
forecasted
growth rate
(%, 2016-2021) Affiliate
Actual growth
rate
(%, 2010-2015)
Average
forecasted
growth rate
(%, 2016-2021) Top/tail
North Africa 4.9 Libya 10.6 9.0 Top
Algeria 3.7 2.9 Tail
West Africa 5.3 Côte d'Ivoire 6.2 7.4 Top
Equatorial Guinea -2.0 -1.8 Tail
East Africa 5.6 Ethiopia 7.1 7.3 Top
Eritrea 2.8 3.6 Tail
Central Africa 4.0 DRC 6.8 5.7 Top
Congo 5.8 2.5 Tail
Southern Africa 4.8 Mozambique 7.5 13.5 Top
Swaziland 1.3 1.2 Tail
Although East Africa’s market size pales in comparison to its western counterparts, it is pegged to grow at a faster
pace (5.6%) between 2016 and 2021, maintaining the speed with which it grew in the preceding five years.
Despite West Africa’s concentration of oil-laden economies, the region is likely to grow at a respectable rate of
5.3%, supported by countries with favourable business environments and diversified growth propositions.
Individual prospects — no two countries are alike
Economic growth prospects differ markedly across the continent (Figure 2.4). Although fewer countries are
anticipated to grow at more than 7% between 2016 and 2021 (compared to the last six years), almost half of the
continent will surpass the regional average of 5%. When asked what represents an attractive rate of economic
growth for your business in the current macroeconomic environment, 40% of respondents to RMB’s survey
answered between 5% and 7%.
Mozambique and Libya remain at the forefront of economic expansion (Table 2.1), registering real GDP growth
of 7.5% and 10.6% respectively between 2010 and 2015. However, Mozambique’s debt troubles are likely to
impact the IMF’s long-term forecasts. Drought, coupled with a staggering decline in investment, is likely to steer
real GDP growth for 2016 to roughly 4% — its lowest level in 23 years. Long-term prospects, particularly with
regard to liquefied natural gas (LNG), are unlikely to be as robust unless the government commits to transparency
and becomes more amenable to IMF policies. Other agencies like the Economist Intelligence Unit (EIU) and
Business Monitor International (BMI) do not subscribe to the IMF’s sanguine view of double-digit growth in
Libya (refer to Table A4 in the Appendices). Consensus forecasts are more aligned to lower levels of crude oil
production, security disruptions and delays to reconstruction works.
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Figure 2.4: Actual vs. forecasted levels of growth (six-year average)
No data
< 2% growth
2% - 3% growth
3% - 4% growth
4% - 5% growth
5% - 6% growth
6% - 7% growth
> 7% growth
Figure 2.4: Actual vs. forecasted levels of growth (six-year average)
2010 – 2015 2016 – 2021
No data
< 2% growth
2% - 3% growth
3% - 4% growth
4% - 5% growth
5% - 6% growth
6% - 7% growth
< 7% growth
Fewer countries are
anticipated to grow
at more than 7%
between 2016 and
2021 compared to
the last six years.
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Does Africa’s growth story still hold water?
On the face of it, it would appear that Africa failed to meet all the MDGs set out by the United Nations (UN)
in 2000, calling into question its ability to engender all-inclusive growth. However, there are a number of
extenuating circumstances.
Table 2.2: Africa’s Millennium Development Goals performance at a glance
Goals Status Remarks
Goal 1:
Eradicate extreme
poverty and hunger
Off track • Poverty in SSA declined from 56.5% in 1990 to 48.4% in 2010 and in
North Africa from 5% to1%.
• Poverty is perpetuated by rising inequalities, unemployment, the youth
bulge, unplanned urbanisation, lack of diversification, etc.
• Hunger declined by 8% in SSA between 1990 and 2013.
• SSA is the most food-deficient of all regions of the world, with 25% of its
population facing hunger and malnutrition in 2011 – 2013.
Goal 2:
Achieve universal
primary education
On track • In 2012, over 68% of African countries had a net enrolment rate of at
least 75% in primary education.
• Average primary completion rate stands at 67%.
• The youth literacy rate reached 70% in 2012, in part owing to increased
access to universal primary education.
Goal 3:
Promote gender
equality and
empower women
On track • Gender Parity Index in primary education increased from 0.82 to 0.96 in
North Africa and from 0.83 to 0.92 in SSA between 1990 and 2012.
• Gender barriers manifest themselves in low transition rates between
education levels.
• Africa has made the most progress in increasing the number of seats
held by women in national parliaments, with an average increase of 15%
between 2000 and 2014.
Goal 4:
Reduce child
mortality
Off track • The under-five mortality rate fell by 55% between 1990 and 2012, while
the infant mortality rate fell by 40%.
• But only Egypt, Liberia, Malawi and Tunisia have achieved both targets on
reducing child mortality.
Goal 5:
Improve maternal
health
Off track • By 2013, Africa had 289 maternal deaths per 100,000 live births,
compared to the world average of 210.
Goal 6:
Combat HIV/AIDS,
malaria and other
diseases
On track • A downward trend is observed in the incidence, prevalence and death
rates associated with HIV/AIDS, malaria and tuberculosis, especially
since 2000.
Goal 7:
Ensure
environmental
sustainability
Off track • Declining forest cover in Africa.
• Consumption of ozone-depleting substances declined by 94% between
1986 and 2012.
• Increasing proportion of terrestrial and marine areas protected.
• In 2012, only 64% of the population in SSA used an improved drinking
water source.
• The proportion of people with access to improved sanitation between
1990 and 2012 increased only moderately in SSA (from 24% to 30%)
compared to North Africa (from 72% to 91%).
Source: UNDP
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In 2007, the Brookings Institution argued that the MDGs were poorly and arbitrarily
designed to measure progress against poverty and depravation which cast Africa in a poor
light relative to other developing countries. In a paper on how the MDGs are unfair to
Africa, the institution contended that the primary goals, which were applied uniformly at
a global level without consideration for regional or country-specific nuances, were largely
unattainable because of the manner in which they were formulated.
In January 2016, the UN launched its development strategy for the next 15 years.
The 17 Sustainable Development Goals (Agenda 2030) provide a framework for green
industrialisation. Unlike the MDGs, Agenda 2030 is underpinned by three dimensions
of sustainable development: economic, environmental and social. Africa’s proactive
engagement with the UN ensured that the continent’s priorities are more evenly reflected
in the document, which should encourage member states to adopt and integrate the
Agenda within national development frameworks. However, implementation will be
staggered as economies are at different stages of structural transformation — which
refers to the redeployment of resources across broad sectors of African economies.
It is contended that the
primary MDGs, which were
applied uniformly, were
largely unattainable because
of the manner in which they
were formulated.
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sidebar 2.1: Earning demographic dividends
Africa’s demographic transition has been slow but progress is tangible. After a period
of measured decline, fertility rates (specifically in SSA) have ostensibly stalled, resulting
in upward revisions to population estimates. This indicates that greater resources will be
required to improve the economic well-being, human capital and social resilience among a
youthful and rapidly-growing population.
The IMF estimates that Africa’s share of the global working age population will rise from
12.6% in 2010 to over 41% by 2100. Overwhelming changes in Africa’s population
structure could have a profound influence on its economic performance and redefine its
role in the global economy.
Lest we forget that a demographic transition in several Asian countries helped shape
the “Asian Miracle” in the 1990s. Asia honed in on human (education and health)
and physical capital. By focussing on labour-intensive export-led growth, it created
employment opportunities to support the transition to sectors with higher total factor
productivity which allowed it to take advantage of its budding labour force.
A rapid transformation in Africa’s age structure paired with a decline in dependency ratios
can yield demographic dividends for the continent. With prudent policies, economies
could reap the benefits of the dividend by fostering healthy, educated and empowered
labour forces that contribute meaningfully to sustained economic growth.
Africa is arguably starting off from a lower base relative to its global counterparts and
the pace of transition is somewhat slower — roughly three generations compared to one
elsewhere across the world. North America and Europe underwent their first demographic
transitions following the world wars, while Asia, Oceania and Latin America experienced
considerable changes in their working age populations from the 1970s. Africa’s earliest
recorded gains are in the 1980s, though individual experiences vary in terms of when
countries began their transitions and where they stand relative to their peak. The IMF
has done considerable work in measuring the pace of demographic change in SSA and
categorises economies into five groups based on the decade in which their transition began
(Figure 2.5).
A rapid transformation in Africa’s
age structure paired with a decline in
dependency ratios can yield demographic
dividends for the continent.
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Figure 2.5: Evolution of shares of working age population (SWAP) in SSA1,2
Note:
1. The decade refers to the period when the country started the transition. Numbers in brackets represent the group’s population and its share of the
sample’s total of 819.6 million in 2010.
2. a) The base of the rectangle shows the SWAP at the beginning of the transition. The transition is still in its infancy in cases where the rectangle is small.
b) The top of the rectangle shows the country’s SWAP in 2012.
c) The end of the line shows the SWAP for a country at its peak.
Source: IMF
• Egypt, South Africa, Botswana, Cabo Verde and Seychelles constitute the first grouping. Each is near completion owing to
rapid declines in their respective mortality and fertility rates which have increased the share of their working age populations
by nearly 20ppt.
• The majority of the countries (29 out of 46), representing nearly 70% of the continent’s population in 2010, set about on
the transition between 1981 and 2000 but are only a quarter way through the process. The IMF does not expect these
economies to reach their peak before 2050.
• Five countries, which constituted 11% of Africa’s population in 2010, embarked on the transition only after 2000.
According to the Africa Finance Corporation (AFC), Africa requires policies that accelerate a reduction in child mortality and help
couples to achieve a smaller family size to reap a large demographic dividend in the near term.
Broadening access to education is also critical to improving productivity of workers and supporting a transition to higher
valued-added sectors. The IMF finds that a structural transformation involving a movement away from agriculture is conducive
to harnessing the demographic dividend. Policies that remove impediments to private sector development and enable labour-
intensive manufacturing will ensure that Africa’s resources are used more effectively.
Figure 2.5: Evolution of shares of working age population (SWAP) in SSA 1,2
0.75
0.7
0.65
(a) SWAP at the beginning of transition (b) SWAP in 2012
0.6
0.55
0.5
0.45
<1970
(55.2m; 6.8%)
1971-1980
(116.9m; 14.3%)
1981-1990
(323.9m; 39.5%)
1991-2000
(232.9m; 28.3%)
2000+
(90.9m; 11%)
Shareofworkingagepopulation(SWAP)intotalpopulation
Egypt
SouthAfrica
Botswana
CaboVerde
Mauritius
Ghana
EquatorialGuinea
Kenya
Madagascar
Zimbabwe
Congo
Tanzania
Nigeria
Mozambique
BurkinaFaso
CAR
Cameroon
Gambia
DRC
Uganda
Chad
Somalia
Angola
Niger
Guinea
Ethiopia
Burundi
Gabon
Eritrea
Mali
Liberia
Senegal
Benin
Rwanda
SierraLeone
Malawi
Côted'Ivoire
Togo
Lesotho
Namibia
Swaziland
Comoros
Guinea-Bissau
SãoToméandPríncipe
Zambia
Seychelles
(c) Peak SWAP
Note:
1. The decade refers to the period when the country started the transition. Numbers in brackets represent the group’s population and its share of the sample’s
total of 819.6 million in 2010.
2. a) The base of the rectangle shows the SWAP at the beginning of the transition. The transition is still in its infancy in cases where the rectangle is small.
b) The top of the rectangle shows the country’s SWAP in 2012. c) The end of the line shows the SWAP for a country at its peak.
Source: IMF
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The role of industrialisation in Africa’s structural transformation
Formal productive employment is crucial to structural transformation. However, a large percentage of the
continent’s workforce is unemployed or contracted to the informal sector to perform less productive activities.
Twin problems of unemployment and underemployment
The United Eco-Action Fund (UNECO) contends that “Africa is plagued by the twin problems of unemployment
and underemploymenti
, mutually reinforcing and exacerbating widespread informality in countries”. The
International Labour Organisation (ILO) purported that Mauritania (31%), Reunion (28.5 %), Lesotho (26.5%)
and Gabon (20.3%) suffered the highest levels of unemployment in 2012. Women were subject to substantially
higher unemployment rates than men in Algeria, Egypt, Ethiopia, Gambia, Libya, Namibia and Tunisia partly due
to differences in accessing labour markets (Figure 2.6). Underemployment is taking root in African labour markets
because of structural barriers that hinder labour to flow to the areas where it is most needed. According to the
African Development Bank (AfDB), only one in four youths will find a wage job over the next decade, and only a
small fraction of those jobs will be formal in modern enterprises.
Figure 2.6: Unemployment rate by gender (2012)1
Female
Male
Note:
1. Data for 2014 does not provide a large sample of African countries.
Source: UNECO, ILO
i
A situation in which a worker is employed but not in a desired capacity in terms of compensation, hours, or level of skill and experience.
Figure 2.6: Unemployment rate by gender (2012)1
0
10
20
30
40
Algeria
Congo
Côted'Ivoire
Egypt
Ethiopia
Gambia
Guinea
Libya
Mauritania
Mauritius
Morocco
Mozambique
Namibia
Rwanda
SouthAfrica
Tunisia
Zambia
%
Female
Note:
1. Data for 2014 does not provide a large sample of African countries.
Source: UNECO, ILO
Male
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Structural transformation, and by implication industrialisation, should provide the means with which to absorb Africa’s youth bulge
through the creation of productive employment opportunities in selected parts of the value chain. In the past, industrialisation meant
that a country had to develop the domestic capacity to perform all the major steps in manufacturing a product. Globalisation has altered
international production networks, affording African economies the opportunity to embed themselves at precisely the right point in
global trade chains.
Dearth of manufacturing activities is an impediment to structural change
Africa’s speed of industrialisation has been hobbled by a host of factors: widespread Dutch Disease, weak infrastructure and vast
geographical distances from high-value markets. This limits the continent’s participation in phenomenon such as the flying-geese
development paradigm in south-east Asia (i.e. the movement of manufactured goods from more advanced to the less advanced countries).
Africa has suffered a sustained decline in manufacturing activities as a percentage of GDP. Its emphasis on resources has limited
the extent of growth in manufacturing production and exports across the continent. This is apparent when observing the share of
manufacturing to GDP (Figure 2.7). For more than half the continent, manufacturing contributes less than 10% to GDP.
Figure 2.7: Manufacturing as a percentage of GDP (2014)
Source: World Bank
There are exceptions of course: Ethiopia’s manufacturing sector has grown, on average, by more than 10% per year since 2014 (albeit
from a very low base), partly because it has courted foreign investors. Tanzania has also recorded meaningful gains, resulting in the
development of a megaport and industrial park to accommodate 7.5% y/y growth in local production.
According to McKinsey & Company, low wage countries like Ethiopia, Kenya, Senegal and Uganda have the potential to grow their
manufacturing sectors by 6.6% annually over the next four years, while diversified economies with more developed manufacturing
sectors, like Egypt, Morocco and South Africa, should achieve annual manufacturing growth rates of 4.3% over the next decade.
Outside of these beacons of hope, progress is limited, constraining the movement of labour to productive sectors of the economy.
Governments are charged with providing the necessary infrastructure and incentives to promote industrialisation and empower regulatory
bodies to enforce development strategies.
Figure 2.7: Manufacturing as a percentage of GDP (2014)
Source: World Bank
0
8
16
24
32
40
Swaziland
Morocco
DRC
Tunisia
Mauritius
Egypt
Benin
Cameroon
SouthAfrica
Senegal
Côted'Ivoire
Zimbabwe
Namibia
Malawi
Kenya
Uganda
Mozambique
Nigeria
Burundi
Lesotho
Sudan
Zambia
Mauritania
Comoros
Seychelles
Guinea
BurkinaFaso
Botswana
Niger
Tanzania
CAR
Gambia
Togo
Ghana
Rwanda
Congo
Ethiopia
SãoToméandPríncipe
Gabon
Chad
SierraLeone
Average
%
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Seeing things a little differently — alternative
ranking prioritising market activity
To assess the importance of economic activity to a country’s overall investment
attractiveness, we amended our principal formula by assigning a larger weighting to the
output variable. The most pronounced changes within the top ten are Ghana and
Côte d’Ivoire’s descent to numbers seven and ten. South Africa and Kenya drop one spot
each while Morocco and Tanzania remain unchanged (Table 2.3).
Nigeria’s overall attractiveness score improves on account of its mammoth economic size,
but it continues to trail South Africa and Egypt due to its poor operating environment.
Egypt snatches the number one spot from South Africa, emphasising the importance of
sustained levels of economic growth to a country’s investment attractiveness.
Smaller economies like Cabo Verde, Seychelles and Swaziland are relegated due to their
marginal economic sizes.
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Table 2.3: Alternative investment ranking prioritising economic activity
Ranking Scoring
Country Alternative Core Change Alternative Core
Egypt 1 2 1 6.6 6.2
South Africa 2 1 -1 6.4 6.5
Morocco 3 3 0 6.2 6.2
Nigeria 4 6 2 6.1 5.9
Ethiopia 5 7 2 6.0 5.7
Kenya 6 5 -1 5.9 5.4
Ghana 7 4 -3 5.8 5.9
Algeria 8 10 2 5.8 5.6
Tanzania 9 9 0 5.8 5.5
Côte d'Ivoire 10 8 -2 5.8 5.1
Tunisia 11 11 0 5.5 5.7
Uganda 12 15 3 5.4 4.9
Rwanda 13 12 -1 5.3 5.4
Zambia 14 16 2 5.2 5.3
Botswana 15 13 -2 5.2 5.2
Senegal 16 17 1 5.1 4.5
Mauritius 17 14 -3 5.0 5.2
Libya 18 21 3 5.0 4.6
Mozambique 19 19 0 5.0 4.8
Angola 20 23 3 4.8 4.7
Namibia 21 18 -3 4.8 4.8
Cameroon 22 20 -2 4.8 4.5
Burkina Faso 23 22 -1 4.5 4.3
Mali 24 24 0 4.5 4.1
DRC 25 28 3 4.4 4.1
Madagascar 26 26 0 4.3 4.2
Gabon 27 25 -2 4.3 4.6
Sudan 28 32 4 4.3 3.7
Benin 29 27 -2 4.2 3.9
Niger 30 29 -1 4.0 3.8
Malawi 31 33 2 3.8 3.6
Togo 32 35 3 3.6 3.5
Guinea 33 37 4 3.6 3.5
Cabo Verde 34 30 -4 3.6 3.8
Zimbabwe 35 39 4 3.6 3.2
Sierra Leone 36 38 2 3.5 3.3
Seychelles 37 31 -6 3.5 3.8
Lesotho 38 34 -4 3.5 3.8
Chad 39 42 3 3.5 3.7
Djibouti 40 40 0 3.4 3.4
Liberia 41 41 0 3.3 3.3
Swaziland 42 36 -6 3.3 3.4
Mauritania 43 43 0 3.3 3.5
Burundi 44 44 0 3.2 3.3
Congo 45 47 2 3.1 3.3
Gambia 46 45 -1 3.0 3.6
São Tomé and Príncipe 47 46 -1 3.0 3.0
Eritrea 48 48 0 2.9 2.5
CAR 49 50 1 2.7 2.6
Guinea-Bissau 50 49 -1 2.6 2.3
South Sudan 51 52 1 2.6 2.5
Comoros 52 51 -1 2.5 2.5
Equatorial Guinea 53 53 0 2.2 2.3
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anddisclaimer

Operating
environment
The fall in resource prices and the
normalisation of US monetary
policy have led to increased investor
scrutiny of emerging and frontier
market risks, exposing the urgent
need to prioritise competitiveness-
enhancing business environment
reforms in Africa.
chapter 3
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anddisclaimer3Operating
environment

Sluggish improvement in doing business
Africa’s operating environment continues to lag behind other regions despite improving on average since 2006
(Figure 3.1). This trend is not expected to change anytime soon — the level of improvement in productivity,
institutions, infrastructure and human capital has been very slow in most countries, and any advancement in
these fields will take time to produce results. The fall in resource prices and the normalisation of US monetary
policy have led to increased investor scrutiny of emerging market risk, exposing the urgent need to prioritise
competitiveness-enhancing business environment reforms.
Figure 3.1: Africa’s operating environment progress compared to other regions
(score, where 10 = best)
Developing economies Emerging Latam
Emerging Asia Africa
Emerging Europe and Middle East World
Changes in our Operating Environment scores
Since the inception of RMB’s Where to Invest in Africa rankings in 2011, we have used a composite Operating
Environment Index to assess the continent’s business environment. It combines four main independent global
assessments on operational issues: The World Bank’s Doing Business Report; Transparency International’s
Corruption Perceptions Index; the Heritage Foundation’s Index of Economic Freedom; and the World Economic
Forum’s (WEF) Global Competitiveness Report. Our selection of surveys is based on their prominence, wide
coverage, and lengthy time series. These four reports combine both objective and subjective assessments of the
operating environment across a wide variety of areas.
By looking back at Africa’s performance, we will be able to see if countries have actually made some improvement
or are still lagging behind. The top five most attractive business environments in 2006 were (in order): Botswana,
South Africa, Mauritius, Namibia and Tunisia. This has changed to Mauritius, Botswana, Rwanda, South Africa and
Seychelles in 2016.
Figure 3.1: Africa’s operating environment progress compared to other regions (score, where 10 = best)
Developed economies
Emerging Asia
Emerging Europe and Middle East
Emerging Latam
Africa
World
2
4
6
8
10
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
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Table 3.1: Operating environment rankings and the change over the past decade (where a score of
10 is the best)1
2016 2006
Score Rank Score Rank
Mauritius 6.86 1 6.28 3
Botswana 6.40 2 6.56 1
Rwanda 6.15 3 3.12 33
South Africa 5.76 4 6.45 2
Seychelles 5.56 5 4.64 9
Namibia 5.46 6 5.97 4
Morocco 5.44 7 4.38 13
Tunisia 5.32 8 5.70 5
Cabo Verde 5.17 9 2.30 47
Swaziland 5.10 10 5.02 7
Ghana 5.03 11 4.42 11
Zambia 5.02 12 4.39 12
Lesotho 4.68 13 4.32 14
Kenya 4.52 14 4.71 8
Egypt 4.38 15 3.76 24
Senegal 4.36 16 3.38 29
Côte d'Ivoire 4.33 17 2.87 40
Uganda 4.30 18 4.47 10
Burkina Faso 4.18 19 3.47 27
Tanzania 4.15 20 3.82 21
Mali 4.13 21 3.38 30
Benin 4.09 22 3.82 22
Gabon 4.05 23 3.72 25
Ethiopia 4.02 24 4.12 16
Mozambique 3.99 25 3.67 26
Algeria 3.91 26 4.24 15
Malawi 3.84 27 4.10 17
Madagascar 3.75 28 3.81 23
São Tomé and Príncipe 3.70 29 - 52
Sierra Leone 3.68 30 2.54 44
Nigeria 3.59 31 3.92 19
Cameroon 3.57 32 5.08 6
Liberia 3.56 33 2.20 48
Togo 3.55 34 2.97 37
Gambia 3.51 35 3.90 20
Mauritania 3.51 36 3.94 18
Burundi 3.48 37 2.97 38
Niger 3.46 38 2.65 43
Djibouti 3.32 39 3.29 32
Guinea 3.29 40 3.39 28
Comoros 3.23 41 1.95 49
Zimbabwe 3.17 42 3.10 34
Eritrea 3.04 43 1.50 50
Chad 2.85 44 2.72 41
Angola 2.79 45 2.50 45
Guinea-Bissau 2.49 46 2.38 46
Congo 2.42 47 3.34 31
Equatorial Guinea 2.42 48 2.69 42
CAR 2.38 49 3.08 35
DRC 2.37 50 3.06 36
Libya 2.21 51 2.91 39
Sudan 1.40 52 1.45 51
South Sudan 0.80 53 - 53
Note:
1. Somalia is not rated due to a lack of data.
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Twenty-one out of the 53 countries’ operating environments have deteriorated over the past decade. The
countries that improved and deteriorated the most over the past ten years are illustrated in Figure 3.2, and the
reasons for these moves are highlighted in Table 3.2.
Figure 3.2: Evolution from 2006, highlighting the best and worst performers
(Score between 0 and 10)
Good (6.5 to 7.5) Most deteriorated Most improved
Moderately good (5.5 to 6.5)
Average (4.5 to 5.5) Cameroon Rwanda
Poor (3.5 to 4.5) Congo Cabo Verde
Very poor (0 to 3.5) CAR Eritrea
Libya Côte d’Ivoire
Source: World Bank, WEF, Heritage Foundation, Transparency International, RMB Global Markets
2006 2011 2016
Figure 3.2: Evolution from 2006, highlighting the best and worst performers (Score between 0 and 10)
Source: World Bank, WEF, Heritage Foundation, Transparency International, RMB Global Markets
Good (6.5 to 7.5)
Moderately good (5.5 to 6.5)
Average (4.5 to 5.5)
Poor (3.5 to 4.5)
Very poor (0 to 3.5)
Most deteriorated
Cameroon
Congo
CAR
Libya
Most improved
Rwanda
Cabo Verde
Eritrea
Côte d’Ivoire
Twenty-one out of the
53 countries’ operating
environments have deteriorated
over the past decade.
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Table 3.2: Improvement and deterioration in business environments
Most improved Reasons Most deteriorated Reasons
Rwanda • Remarkable development
successes, which have helped
reduce poverty and inequality.
• Strong institutions.
• Significant improvement in
labour market efficiency and
getting credit (financial market
efficiency).
Cameroon • Although still a relatively
competitive economy in West
Africa, there are certain areas
of its business environment
that have deteriorated.
• There has been a slowdown in
infrastructure development.
• Hardly any improvement in
education.
• Progress is hampered by
persistent problems with
corruption.
Cabo Verde • Major strides in improving
institutions, technological
readiness and higher
education.
• Health and primary education
relatively strong compared to
other SSA nations.
Congo • Press freedom is becoming
more constrained.
• Potential deterioration in
political stability.
• Deterioration in government
effectiveness and electricity
supply.
Eritrea • Comes from a very low
base and still a very difficult
business environment.
• However, progress seen in
terms of control of public
spending, labour freedom and
monetary freedom, offsetting
a small decline in freedom
from corruption.
• Several state-owned
companies have been
privatised in recent years.
CAR • Severe political instability,
especially in 2013.
• Alarming deterioration in
humanitarian situation.
• Increased trade costs due
to being landlocked. Low
investment to GDP.
Côte d’Ivoire • Significant increase in political
stability.
• Improvements seen in many
areas like government
efficiency and rule of law.
• Fully open to foreign
investment.
Libya • Centralised control of
government spending and a
significant rise in corruption.
• Rudimentary financial markets.
• Government instability is the
most problematic factor for
doing business.
• Decline in basic requirements
like institutions.
• Rise of Islamist militancy.
Source: RMB Global Markets, WEF, World Bank, EIU
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Top performers in 2016
Mauritius remains Africa’s most attractive business environment. It boasts well-developed infrastructure, the most
healthy and educated workforce, the most efficient goods market and strong institutions. The island economy
is followed by Botswana and Rwanda, also known as ‘moderately good’ business environments. South Africa
just fell short of being classified in the same category — Africa’s most competitive economy (according to
WEF) has experienced a slow but steady deterioration in its operating environment. Business leaders want the
government to address its inefficient electricity supply and, most importantly, the inflexible labour market.
Health and the quality of education also remain worrisome. But South Africa still leads the continent in vital
areas like financial markets, transport infrastructure and strong institutions. Seychelles has overtaken Ghana
since 2015, taking up fifth position as Ghana’s progress has slowed due to significant fiscal indiscipline.
Mauritius remains Africa’s most
attractive business environment.
It boasts well-developed
infrastructure, the most healthy
and educated workforce, the
most efficient goods market and
strong institutions.
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SIDEBAR 3.1: A strong upswing in the business environment — Côte d’Ivoire
Côte d’Ivoire has been identified as one of the most improved business environments on the continent in the past
decade. Strong private investment growth in areas such as agriculture, agribusiness, mining, light manufacturing,
housing and services has been spurred by the government’s pro-business reforms.
• It is one of the most open countries to foreign equity ownership in Africa, while all of its business sectors are
fully open to foreign investment.
• The West African CFA franc (XOF) is linked to the euro at a fixed exchange rate and unlimited convertibility to
the euro is guaranteed. CFA members have agreed to apply exchange control regulations modelled on those
of France, and transfers within the CFA zone are not restricted.
• Dividends out of revenue and capital on disinvestment may be remitted.
• With the exception of electricity transmission, there are no other sectors with monopolistic or oligopolistic
market structures nor are there any perceived difficulties in obtaining any required operating licences.
Recent reforms have improved the business environment in areas such as:
• Business creation
• Property registration
• Access to credit
• Protection of minority investors
Source: skyscrapercity.com, getty.com
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Côte d’Ivoire is certainly on many firms’ radars, especially after the country made a remarkable economic recovery
since the end of the post-electoral crisis in 2011. Furthermore, the holding of a peaceful presidential election in
October 2015 has strengthened political stability. This has helped the number of business start-ups and private
investments to increase significantly, and has drawn the African Development Bank (AfDB) headquarters back to
its shores. Now, major businesses are interested in establishing regional offices in Abidjan.
Of course the country does not come without its challenges, these include:
• Low infrastructure development
• Shortage of skilled workers
• Insufficient and unreliable market data
• Limited use of English
• Uncertainty of legal protection
• High corruption
• High poverty levels
Côte d’Ivoire has been
identified as one of the
most improved business
environments on the
continent in the past decade.
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Most problematic factors for doing business — Status quo no different to a
FEW YEARS ago
Figure 3.3: The most problematic factors for doing business in Africa
2015
2010
Source: WEF
It comes as no surprise that the WEF highlighted access to financing, inadequate infrastructure and corruption as the top three major
business impediments for five years running. Similarly, in our in-house survey, almost half of the respondents emphasised access
to financing as the most problematic factor for doing business on the continent. Thirty percent of participants chose government
bureaucracy, followed by corruption and then the infrastructure deficit.
3. Infrastructure
Efficient infrastructure is critical for ensuring the effective functioning of an economy. High-quality roads, railroads, ports, and air
transport enable the smooth flow of goods and services; sufficient electricity supply allows business to produce goods without
interruption; and telecommunication makes the sharing of important information possible. We have seen a large amount of FDI flows
focussing on these specific projects is Africa, which has complimented the growth story for the continent. But, it is well known that
infrastructure development remains painstakingly slow and keeps the continent from achieving potential growth. This is discussed more
fully in Chapter 5.
Figure 3.3: The most problematic factors for doing business in Africa
Source: WEF
2015
2010
0 5 10 15 20
Poor public health
Government instability/coups
Restrictive labour regulations
Crime and theft
Foreign currency regulations
Policy instability
Inflation
Poor work ethic in national labour force
Inadequatly educated workforce
Tax rates
Tax regulations
Inefficient government bureaucracy
Inadequate supply of infrastructure
Corruption
Access to financing
% of respondents
1
2
3
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2. Corruption
According to Transparency International, poor countries across the world lose around US$1 trillion a year to
corruption, with Africa losing the bulk of this number. Somalia remains the most corrupt country in Africa, and in
the world. Sudan, South Sudan, Angola and Libya follow at its heels. Botswana is perceived as the least corrupt in
Africa, sitting at 28th
in the world, followed by Cabo Verde, Seychelles, Rwanda, Mauritius and Namibia.
Albeit at a slow pace, 35 out of the 54 African countries have made an improvement in their Corruption
Perception Index scoring over the past decade (Figure 3.4). Six countries’ scorings remained the same, while a
staggering 13 have deteriorated. The biggest progress over the past decade was seen in Cabo Verde, while the
country which weakened the most was Cameroon. The high level of power concentrated in the executive branch,
lack of judicial capacity, and widespread poverty are some of the factors that have made corruption — in the form
of bribery, extortion, tax evasion and electoral manipulation — so rampant.
Figure 3.4: Corruption Perception Index (CPI) – winners and losers between 2005 and 2015
Improved
Unchanged
Deteriorated
Source: Transparency International, RMB Global Markets
1. Access to financing
The repatriation of hard currency has been Africa’s Achilles heel for many years. In our previous editions, we
have delved into the main reasons for this problem, including exchange controls, pricing and liquidity. Liquidity,
in particular, was the main culprit of many firms’ repatriation woes in 2015/2016. And the problem will
certainly remain over the medium term. The reasons can be tracked back to Chapter 2, where we highlight that
commodity prices are not expected to increase significantly over the medium term, while most countries still battle
with dual deficits.
The lack of consistent US dollar inflows has led to new foreign exchange restrictions designed to shield the
currency, making it increasingly difficult for investors and business owners to repatriate capital or pay for imports.
In some instances, hard currencies are being used exclusively to facilitate priority transactions. The severity of
these actions has differed across jurisdictions.
Figure 3.4: Corruption Perception Index (CPI) – winners and losers between 2005 and 2015
Source: Transparency International, RMB Global Markets
Improved
Unchanged
Deteriorated
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Transferability and convertibility risks in Africa
Where are we seeing the issues?
The regions where FirstRand Bank has operations and could encounter liquidity and currency challenges are West Africa (Nigeria and
Ghana), East Africa (Tanzania and Kenya) and Southern Africa (Zambia, Mozambique and Angola). All these countries in one way or
another run managed floating exchange rate regimes, meaning that their central banks could intervene in their foreign exchange markets
to support the currencies.
Africa’s continued resource dependence is what leads us to believe that liquidity will remain a significant issue over the next two years as
export revenues remain low. See Table 3.3 for more details on the liquidity situation in selected African countries as at June 2016.
Table 3.3: Drivers of and risks to liquidity in Africa
De facto currency
classification
Existence
of informal
market
Differential
between
formal and
informal
exchange
rate
(June 2016)
Depreciation of
local currency
between 1Q14
and 2Q16
Difficulties in converting local
currency to US dollars
Angola Heavily managed float. Yes 324% 70% Contingent on adequate liquidity
accruing from the sale of oil
exports. More onerous during
periods of severe market stress,
reflected in the active depletion of
international reserves and sharp
depreciation. This was apparent
in 2009 and 2014 following a
substantial drop in the oil price.
Ghana Managed float. No - 65% Problematic during prolonged
periods of cedi weakness,
similar to 2014. Convertibility is
challenging when macroeconomic
fundamentals deteriorate. US
dollar availability is best during the
third quarter of the year owing to
seasonal inflows.
Kenya Managed float. No - 17% Challenging when trade imbalances
occur as in 2011. Staggering
increase in import demand,
following intense drought, led to
a dearth of US dollar liquidity and
resulted in severe interest rate hikes
and significant re-pricing of local
currency bonds.
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Primary origin
of US dollar
inflows
Change in
primary revenue
earners
between 1Q14
and 2Q16
Primary source of US
dollar demand
Actual reserve
coverage
(months of
import cover) Exchange controls
Merchandise
exports (crude
oil).
Oil: 55% drop. Merchandise imports
(machinery, marine
vessels, electrical
equipment and articles of
iron and steel), payment
of services (freight
transport, construction)
and income on equity and
investment fund shares.
8.30 Operators that require local currency in order to
make payments for goods and services to Angolan
residents must sell their foreign currency to the
central bank (BNA). This obligation also applies
to investors that conduct petroleum exploration
activities in Angola. Other investors can sell the
foreign currency required to make local currency
payments to residents to Angolan commercial
banks. The exchange rate applied for the sale of
foreign currency to the BNA shall be the BNA’s
primary market purchase rate. Operators must
inform the BNA before the 28th
day of each month
of the expected amount of funds which they
require during the subsequent month to cover
the costs of their oil and gas related activities.
In terms of Angola’s Law on Private Investment,
foreign investors can be theoretically guaranteed
the repatriation of profits and dividends arising in
Angola after certain conditions have been complied.
Merchandise
exports (gold,
cocoa and
crude oil).
Gold: 8%
increase. Cocoa:
6% increase. Oil:
55% drop.
Merchandise imports
(machinery, electronic
equipment, machinery
and vehicles), payment of
services (freight transport)
and income on equity and
investment fund shares.
3.60 Effective 1 July 2016 all exporters, except those who
operate in accordance with Retention Agreements
and who have been permitted to operate accounts
offshore, are required to repatriate in full all their
export receipts to banks in Ghana for the credit
of their foreign exchange accounts (FEA) or to be
converted into cedis on a need basis. Investors
under the Ghana Investment Promotion Centre
Act, 1994, are guaranteed free transfer of profits,
interest, fees, charges, loan repayments and
liquidation proceeds, while expatriate personnel are
allowed to transfer a certain quota of their annual
earnings. Non-resident companies are, in principle,
free to transfer abroad their net after-tax profits,
provided the transfer is done through persons
approved by the Bank of Ghana (BoG).
Merchandise
exports
(agricultural
products), service
receipts and
secondary income
derived from
government and
NGOs.
Tea1
: 4% drop.
Tourism receipts
down by 16% in
2015.
Merchandise imports
(mineral fuels, vehicles,
electronic equipment
and machinery), payment
of services (freight
transport) and income on
investment.
4.90 Foreign exchange controls do not apply in Kenya.
Commercial banks may process remittances with
respect to bona fide business transactions without
approval from the Central Bank of Kenya (CBK).
However, commercial banks are required to inform
the central bank of any daily remittances from
the country in excess of US$10,000. In times of
exchange rate volatility, certain importers are
required to purchase their foreign currency directly
from the central bank. Primarily, this relates to oil
importers and marketers.
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De facto currency
classification
Existence
of informal
market
Differential
between
formal and
informal
exchange
rate
(June 2016)
Depreciation of
local currency
between 1Q14
and 2Q16
Difficulties in converting local
currency to US dollars
Mozambique Managed float. Yes 8.5% 118% Contingent on adequate liquidity
accruing from the sale of coal
and aluminium exports and donor
flows. More onerous during
periods of severe market stress,
reflected in the depletion of
international reserves, worsening
debt metrics, slowdown in FDI and
extreme currency volatility. This was
apparent in 2009, 2014/15 and
2015/16.
Nigeria Heavily managed float. Yes 25% 76% Dependent on adequate liquidity
accruing from the sale of oil
exports. Exceptionally problematic
since 2014 due to the structure of
the FX market. Portfolio investors
have largely sold their holdings.
Continued divergence between the
official and parallel rate indicates
level of difficulty in attaining
US dollars.
Tanzania Managed float. No - 38% Challenging when trade
imbalances occur as was the case
in 2011.
Zambia Free float. No - 74% Challenging funding environment
since 4Q14. Liquidity largely
sapped on account of risk aversion,
panic selling and dramatic decline
in copper prices. Severe US dollar
shortage in the onshore market,
restricting convertibility.
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Primary origin
of US dollar
inflows
Change in
primary revenue
earners
between 1Q14
and 2Q16
Primary source of US
dollar demand
Actual reserve
coverage
(months of
import cover) Exchange controls
Merchandise
exports
(aluminium and
coking coal) and
secondary income
from government,
NGOs and
donors.
Coal: 30% drop.
Aluminium: 7.5%
drop. Donor
funding was
suspended at the
time of writing.
Merchandise imports
(mineral fuels and
machinery), payment of
services (freight transport
and other business
services).
2.84 Capital operations, such as FDI, loans, credit
arrangement contracts outside Mozambique,
opening and movement of bank accounts outside
Mozambique when undertaken by resident entities
still require pre-authorisation by the Bank of
Mozambique (BDM). Mandatory use of the national
banking system for any foreign exchange operation
(payments and income received). Mandatory
declaration of foreign exchange assets. Mandatory
remittance to the country of income received from
exports of goods and services.
Merchandise
exports
(crude oil).
Oil: 55% drop. Merchandise imports
(mineral fuels, machinery,
electronic equipment
and vehicles) and services
payments (freight and
passenger transport,
personal travel, financial
services, ICT, other
business and government
services).
5.24 Equity and/or loan capital must be brought into
Nigeria through authorised dealers (i.e. banks). The
remittance of dividends and interest is permitted,
provided the equity and/or loan was imported
and is evidenced via an appropriate certificate of
capital importation. There are no restrictions on
the percentage of profits that may be distributed
as dividends subject to the dividend tax rule
consideration. The remittance of royalty and service
fees is permitted, provided the underlying licence
and service agreements have been approved by
the National Office for Technology, Acquisition and
Promotion. Authorised dealers of foreign currencies
need to notify the Central Bank of Nigeria (CBN) of
any cash transfer to, or from a foreign country, of
any sum in excess of US$10,000. A tax clearance
certificate, or other evidence of payment of the
appropriate tax, must, however, be obtained by
anyone wishing to remit dividends, interest, royalty
or service fees outside the country. Recently, the CBN
issued a directive making it illegal to price a product
or consummate a business offer within Nigeria in any
currency other than the local currency.
Merchandise
exports (precious
metals and
tobacco).
Gold: 8%
increase.
However, the
production levels
have been scaled
back due to high
operating costs.
Merchandise imports
(electronic equipment,
mineral fuels and
machinery).
3.90 Tanzania does not have exchange controls in respect
of capital inflows and overseas remittances. A
maximum of US$10,000 travel allowance for each
trip out of Tanzania is granted to an individual.
Transactions between residents of Tanzania and
non-residents require the approval of the Bank
of Tanzania (BoT). However, transfers of shares
between residents and non-residents do not require
approval. Resident corporations may remit capital
and income to non-resident corporations through
commercial banks operating in Tanzania.
Merchandise
exports (copper).
Copper: 32%
drop.
Merchandise imports
(mineral fuels and
machinery), services
payments (freight and
passenger transport and
business and personal
travel) and payment of
investment income.
3.90 There are no foreign exchange controls in Zambia.
Note:
1. Kenya tea auction price.
Source: RMB Global Markets, Deloitte, Trade Map, EIU, Bloomberg, I-Net Bridge
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Accessing credit to invest
Risks ranging from economic to political will encourage or discourage funding opportunities for businesses
wanting to enter African markets. This is where credit ratings play a large role by evaluating the credit risk of a
prospective debtor (an individual, a business, company or a government), predicting their ability to pay back debt,
and providing an implicit forecast of the likelihood of the debtor defaulting.
Africa did not go unscathed over the past few years when it comes to sovereign credit ratings. Increased debt
levels, and policy and political uncertainty (to name a few) have caused most international ratings agencies to
downgrade certain sovereigns, indicating increased credit risk. Only two countries, Mauritius and Uganda, improved
their ratings when comparing 2011 to 2016 (Table 3.4). It is a striking reality that the risk profile of most African
countries has deteriorated significantly, especially from mid 2014, driven mostly by weakening debt metrics.
Table 3.4: Sovereign ratings actions in 2011 and 2016
Fitch Moody’s S&P
2011 2016 2011 2016 2011 2016
Angola BB- B+ Ba3 B1 BB- B
Botswana - - A2 A2 A- A-
Burkina Faso - - - - B+ B-
Cameroon B B - - B B
Cabo Verde B+ B - - B+ B
Congo - - - B3 - B-
Côte d'Ivoire - B+ - Ba3 - -
Egypt BB- B B2 B3 B+ B-
Ethiopia BB- B - B1 - B
Gabon BB- B+ - B1 BB- B
Ghana B+ B - B3 B B-
Kenya B+ B+ - B1 B+ B+
Lesotho BB- B+ - - - -
Mauritius - - Baa2 Baa1 - -
Morocco BBB- BBB- - Ba1 BBB- BBB-
Mozambique B CCC - Caa1 B+ B-
Namibia BBB- BBB- - Baa3 - -
Nigeria BB- B+ - B1 B+ B+
Rwanda B- B+ - - - B+
Senegal - - - B1 B+ B+
Seychelles - BB- - - - -
South Africa BBB+ BBB- A3 Baa2 BBB+ BBB-
Tunisia BBB- BB- Baa3 Ba3 BBB- BB-
Uganda B B+ - B1 B+ B
Zambia B+ B - B3 B+ B
Note:
Where red depicts a worsening in the sovereign rating, green an improvement and yellow no change. Data as at June 2016.
Source: Fitch, Moody’s and S&P
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environment

Time will not heal
Although very difficult to measure, we believe that access to financing will remain
the most problematic factor for doing business in Africa for many years to come. The
development of financial markets is too slow to ease the significant pressures in most
nations, while access to export earnings will remain strained in the medium term due to
low commodity prices. Similarly, the infrastructure deficit remains too large to experience a
quick fix, and in many instances, governments are being forced to delay large projects due
to much-needed fiscal consolidation. Last but not least, corruption remains rife in many
countries across the continent. The political will to eradicate corruption is still far too low
to have any significant impact over the next five years.
Alternative rankings
Our clients have different ways of measuring the attractiveness of countries. In many
cases, we find that some are more concerned about the challenges of doing business than
economic growth or market size, and therefore they place greater emphasis on the risks
associated with Africa’s different operating environments. We have therefore tweaked
our core methodology to give a larger weighting to the operating environment scoring,
in which case the top five most attractive investment destinations change to South Africa,
Morocco, Egypt, Mauritius and Botswana.
Although very difficult to measure,
we believe that access to financing
will remain the key problematic factor
for doing business across Africa for
many years to come.
1Overview
5Infrastructure
7Retail
9Appendices
2Marketactivity
4Finance
6Resources
8Country
environment

Table 3.5: Alternative investment ranking prioritising the operating environment
Rank Score
Country Alternative Core Change Alternative Core
South Africa 1 1 0 6.2 5.8
Morocco 2 3 1 5.9 5.4
Egypt 3 2 -1 5.8 4.4
Mauritius 4 14 10 5.6 7.0
Botswana 5 13 8 5.6 6.4
Rwanda 6 12 6 5.6 6.2
Ghana 7 4 -3 5.6 5.1
Tunisia 8 11 3 5.5 5.4
Kenya 9 5 -4 5.4 4.2
Côte d'Ivoire 10 8 -2 5.3 4.2
Ethiopia 11 7 -4 5.3 3.9
Tanzania 12 9 -3 5.3 4.1
Nigeria 13 6 -7 5.3 3.5
Algeria 14 10 -4 5.2 4.0
Zambia 15 16 1 5.2 5.1
Uganda 16 15 -1 5.0 4.1
Namibia 17 18 1 5.0 5.3
Senegal 18 17 -1 4.9 4.3
Mozambique 19 19 0 4.6 4.1
Burkina Faso 20 22 2 4.4 4.1
Mali 21 24 3 4.4 4.1
Cameroon 22 20 -2 4.4 3.6
Gabon 23 25 2 4.2 4.2
Seychelles 24 31 7 4.2 5.3
Benin 25 27 2 4.2 4.0
Madagascar 26 26 0 4.1 3.8
Angola 27 23 -4 4.1 2.8
Cabo Verde 28 30 2 4.1 5.3
Libya 29 21 -8 4.1 2.3
Zimbabwe 30 39 9 3.4 3.2
Swaziland 31 36 5 3.9 5.0
Niger 32 29 -3 3.8 3.4
Malawi 33 33 0 3.8 4.0
DRC 34 28 -6 3.7 2.3
Togo 35 35 0 3.6 3.4
Sierra Leone 36 38 2 3.6 3.7
Guinea 37 37 0 3.5 3.2
Zimbabwe 38 39 1 3.4 3.2
Liberia 39 41 2 3.4 3.6
Djibouti 40 40 0 3.4 3.4
Mauritania 41 43 2 3.3 3.3
Sudan 42 32 -10 3.3 1.4
Burundi 43 44 1 3.3 3.5
Chad 44 42 -2 3.3 2.8
São Tomé and Príncipe 45 46 1 3.2 3.6
Gambia 46 45 -1 3.2 3.6
Eritrea 47 48 1 3.0 2.8
Congo 48 47 -1 2.9 2.5
Comoros 49 51 2 2.7 3.1
Guinea-Bissau 50 49 -1 2.6 2.5
CAR 51 50 -1 2.6 2.4
Equatorial Guinea 52 53 1 2.3 2.3
South Sudan 53 52 -1 2.0 0.8
1Overview
5Infrastructure
7Retail
9Appendices
2Marketactivity
4Finance
6Resources
8Country
environment

finance
Access to financing is perceived as a far
greater challenge to doing business in
Africa than the threat of corruption or
absent infrastructure.
chapter 4
1Overview
3Operating
7Retail
9Appendices
2Marketactivity
4Finance
6Resources
8Country
anddisclaimer

Africa is yet to fully capitalise on
the positive relationship between
financial sector development and
sustainable levels of GDP growth.
A forward-looking approach to an age-old problem
Despite Africa’s vigorous pursuit of balanced growth, it is yet to fully capitalise on the positive relationship
between financial sector development and sustainable levels of GDP growth.
A host of executives, surveyed annually by WEF, still perceive access to financing as a greater challenge to doing
business in Africa than the threat of corruption or inadequate infrastructure. Supporting this view is an appraisal
of Africa in terms of its level of account penetration, the proximity of financial institutions and the amount of
credit extended to the private sector.
At an individual level, a little over a third of SSA’s population aged 15 and above have an account at a formal
financial institution (Table 4.1). The situation is no different with regard to the number of bank branches per
100,000 adults. Domestic credit to the private sector is roughly 48% of GDP. Although a tad better than South
Asia, it reflects a lack of depth in financial intermediation at a private sector level.
Table 4.1: Regional trends in access to financing (2014)
Region
Domestic credit to
private sector
(% of GDP)
Commercial bank
branches
(per 100,000 adults)
Account at financial
institution
(%)
SSA 48.14 3.71 34.21
South East Asia 46.71 8.70 46.40
High income: OECD 159.15 29.18 94.01
Developing Europe and Central Asia 56.59 20.63 51.43
Developing East Asia and the Pacific 128.66 6.06 68.96
Source: World Bank
In this chapter we evaluate the extent of Africa’s financial market development, address a primary hurdle to access
to financing and showcase viable alternatives outside of traditional bank funding.
1Overview
3Operating
7Retail
9Appendices
2Marketactivity
4Finance
6Resources
8Country
anddisclaimer

Sticky perceptions
Over the last five years, perceptions regarding the extent of Africa’s financial market development have remained sticky. Of the 39
African countries surveyed by WEF, Algeria, Burkina Faso, Burundi, Chad, Angola, Lesotho, Madagascar, Mauritania and Mozambique
have consistently been ranked among the least developed financial markets in Africa since 2011 (Figure 4.1). Low intermediation levels,
uncompetitive banking landscapes, fairly large interest rate margins and difficulties in assessing creditworthiness have encumbered
financial development in these markets.
Yet, there are a handful of outperformers who have adopted strict practices to accelerate financial market development. South Africa has
been unchallenged in this category for the last nine years, while Mauritius, Kenya, Ghana, Botswana and Zambia feature regularly within
the top ten.
Rwanda, Côte d’Ivoire and Senegal have made great strides in developing their respective financial markets since 2011. It is believed to
be easier to access venture capital in these economies while the regulation of securities exchanges have vastly improved (refer to Table
A14 continued in the Appendices).
Figure 4.1: Extent of financial market development (rank, where 1 = best; 40 = worst)1
2015-2016
2011-2012
2006-2007
Note:
1. Countries absent of data were not surveyed during that particular year.
Source: WEF
Figure 4.1: Extent of ﬁnancial market development (rank, where 1 = best; 40 = worst) 1
Note:
1. Countries absent of data were not surveyed during that particular year.
Source: WEF
2015-2016
2011-2012
2006-2007
0
8
16
24
32
40
SouthAfrica
Rwanda
Mauritius
Kenya
Namibia
Côted'Ivoire
Zambia
Botswana
Morocco
Senegal
Ghana
Nigeria
Uganda
Swaziland
Gambia
Gabon
Cameroon
Malawi
Tanzania
Benin
Seychelles
Liberia
CaboVerde
Ethiopia
Egypt
SierraLeone
Zimbabwe
Mozambique
Lesotho
Chad
Madagascar
Algeria
Mauritania
Burundi
Angola
BurkinaFaso
1Overview
3Operating
7Retail
9Appendices
2Marketactivity
4Finance
6Resources
8Country
anddisclaimer

SIDEBAR 4.1: Liquidity — a thorn in investors’ sides
Foreign exchange liquidity, or a lack thereof, is often cited as a major impediment to doing business in Africa.
Fifty-seven percent of respondents to RMB’s in-house survey quoted liquidity as their biggest challenge in
managing their foreign exchange (FX) risk (Figure 4.2).
Figure 4.2: Main challenges when managing FX risk in Africa
The problem is often characteristic of shallow financial markets plagued by exorbitant transaction costs, a limited
number of active participants and lengthy settlement periods, and has become commonplace, particularly in
resource-laden economies.
Despite a nascent recovery in commodity prices in 2016, numerous economies remain burdened by balance of
payments constraints, throwing their respective FX markets off kilter. Muted export earnings, limited growth
in services receipts and marginal capital inflows have limited the extent to which these markets can effectively
balance FX demand.
Over the last 18 months, a host of key commodity players — including Nigeria, Mozambique and Zambia — have
experienced acute bouts of illiquidity, which have manifested in intense currency volatility (Figure 4.3) and in some
cases exaggerated the gap between official and informal FX rates.
Figure 4.2: Main challenges when managing FX risk in Africa
%ofrespondents
Lack of understanding
on FX market workings
Liquidity, being able
to buy and sell FX
0
12
24
36
48
60
Market volatility Changes in
regulation
Inadequate ﬁnancial
risk management systems
1Overview
3Operating
7Retail
9Appendices
2Marketactivity
4Finance
6Resources
8Country
anddisclaimer

Wtiia 2016 2017

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