JSE remained Africa’s most liquid stock exchange with an excess of $1.4 billion (R20.68bn) traded daily. Photo: Siphiwe Sibeko/Reuters

CAPE TOWN – South Africa has fallen to third place in RMB’s “2020 Where to Invest in Africa” report, due to its constrained economic growth, but it remains Africa’s bastion of a well-developed financial and capital market.

The report said the JSE remained Africa’s most liquid stock exchange with an excess of $1.4 billion (R20.68bn) traded daily. This is much higher than the Cairo Stock Exchange in Egypt, which trades $44 million a day.

It said South Africa also ranked highly on other financial market depth measures such as private credit as a percentage of gross domestic product (GDP), demonstrating that consumers have access to a wider range of financial instruments relative to other African countries.

South Africa’s ease of doing business ranking, however, has slipped in the last few years, but it remains one of the Top 10 easiest operating environments in Africa, the report showed.

“This has allowed international companies to still view South Africa as a gateway to the rest of the continent,” said RMB Global Markets Research head and co-author of the report, Nema Ramkhelawan-Bhana, in a statement.

However there were mounting risks: South Africa is struggling with uninspiring growth. Against a backdrop of modest demand and persistent electricity constraints, GDP growth for South Africa is forecast at only 0.6 percent and 1 percent in 2020 and 2021.

“We never fail to be pleased and surprised by the extent of improvement in countries that are not necessarily perceived as strong investment destinations. This year, Guinea, Mozambique and Djibouti recorded the strongest gains in the rankings, with notable advancements in their operating environments,” said Ramkhelawan-Bhana.

The rankings also identify countries that have either stagnated or deteriorated.

South Africa, Ethiopia and Tanzania were among the prominent countries to have taken a tumble.

Tanzania’s fall from grace had reshuffled the top 10 investment destinations. Tunisia returned to the fold at number 10, while Ivory Coast and Ghana edged closer to the top five. Morocco displaced South Africa, rising to second place.

The top destination was Egypt. The big size of the market and a sophisticated business sector relative to other countries made it the most attractive investment destination in Africa.

The improvement in Egypt’s business environment, facilitated through government programmes, and a steady increase in investment from the private sector had enhanced growth and assisted in repositioning Egypt on the global investment map.

Taking second place was Morocco. While only Africa’s fifth-largest market, GDP growth was expected to be more than 4 percent over the medium term, and an enhanced operating environment had served the country well since the Arab Spring.

Reintegration into the African Union and accession to the Economic Community of West African States also lifted its investment appeal.

Kenya was placed fourth. Above 5 percent expected growth rates, helped by favourable weather and political reconciliation after 2017’s disputed elections, had propelled Kenya one spot higher than 2019.

The economy benefits from diversity and a sustained expansion in consumer demand, urbanisation, East African Community integration, structural reforms and investment in infrastructure, including an oil pipeline, railways, ports and power generation.

Rwanda was in fifth place. According to the World Bank’s operating environment scoring, the country has more than doubled the efficiency of its business environment in less than a decade.

The government has invested heavily into its domestic industries and foreign direct investment has increased, pushing Rwanda to one of the five fastest-growing economies on the continent.

Nigeria, with an eighth ranking, had retained its top 10 position due to improved macroeconomics, supported by recovering oil prices and production. With the largest population on the continent, domestic demand continues to rise.

BUSINESS REPORT