Home NIGERIA After economic turbulence, investment climate brightens in Africa, latest risk-reward index shows

After economic turbulence, investment climate brightens in Africa, latest risk-reward index shows Updated for 2021

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Updated: February 26, 2021


After years of economic turbulence, things are gradually improving in Sub-Saharan Africa and may remain that way for a few years, the latest economic prediction shows.

The latest risk-reward index from specialist risk consultancy Control Risks and Oxford Economics shows that Africa’s investment environment for both businesses and financial investors is brightening and strengthening.

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Growth on the continent is rebounding after several years of political and economic turbulence, with the weakest growth since the early Nineties.

The report projects an accelerating resurgence in growth in Sub-Saharan Africa (SSA) to the end of the decade that will see strengthening investment returns versus risk.

Sub-Saharan Africa GDP growth is forecast to climb to 3.7% next year, after picking up to 2.9% this year from 2.6% in 2017, and an anaemic 1.1% in 2016.

By 2020, SSA growth should reach a buoyant 4.3%. Other key economic indicators, such as levels of foreign direct investment, have also been improving, the economists said.

Crucially, the latest Africa Risk-Reward Index findings highlight how the recovery in sub-Saharan Africa’s outlook is not being driven by the “usual suspects” of the region’s major economies, notably Nigeria and South Africa.

Africa risk index TODAY NEWS AFRICADownload

Along with Angola, the index finds that Nigeria and South Africa have seen only minor improvements in the risk-reward trade-off since the last report in June. This chimes with recent warnings from the International Monetary Fund (IMF) that poor relative performance by these economies is holding back the wider African economy.

The far-reaching political change occurring across swaths of sub-Saharan Africa since late 2017 have seen reform agendas being pushed by new leaders in countries such as Angola and Ethiopia that represent broadly positive steps towards future growth. However, the report finds that only in Zimbabwe have the current wave of reforms yet led to significant improvements in our risk-reward scores.

Barnaby Fletcher, senior analyst at Control Risks comments: “Since the first edition of the Africa Risk-Reward Index, the continent has seen dramatic political changes. However, what we are seeing is that ambitious rhetoric from new leaders is no substitute for solid structures and sensible policies built up over many years. Obtaining an understanding of an investment destination that goes beyond the headlines is therefore crucial.”

Jacques Nel, Chief Economist for East & Southern Africa at Oxford Economics adds: “From the reward point of view, the most interesting change in the index since the first edition is the improvement by one of the continent’s giants, Nigeria, which has emerged from recession thanks to a combination of policy initiatives and a recovery in oil prices. This more favourable outlook is reflected in its latest reward score, which shows it gaining some ground on other African geographies.”

This third edition of the Africa Risk-Reward Index explores the impact of current and future political change in more detail, focusing on recent and upcoming elections in Congo (DRC), Nigeria and Gabon, and their potential impact. It also explores several smaller markets for investors, considering the outlook for Uganda and Rwanda, two countries with a number of parallels, but where differing economic ideologies and leadership styles have seen their trajectories diverge, although growth and investment prospects will remain positive for both countries.

The index also considers prospects in Tunisia, which has struggled to fully recover from the Jasmine Revolution of 2011, but where there are some early signs that the ambitious reform agenda pursued by the government is starting to have a positive impact.

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Simon Ateba
Simon Ateba
Simon Ateba covers the White House, the U.S. government, the International Monetary Fund, the World Bank and other financial and international institutions for Today News Africa in Washington D.C. Simon can be reached on simonateba@todaynewsafrica.com

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