(Bloomberg) -- Seychelles and Mauritius topped a ranking of African investment destinations, as the attractiveness of South Africa deteriorated because of the nation’s weak economic indicators, according to Rand Merchant Bank.
The two Indian Ocean island nations outperform the continent when measured by a combination of their economic performance, market accessibility, investment climate and social and human development, the Johannesburg-based lender said in a report published on Tuesday. Egypt was third in RMB’s ranking, which assessed 31 nations on the continent in the report published on Tuesday.
The two economies stand out in an investment climate in which Africa is being buffeted by “significant turbulence,” RMB Chief Economist Isaah Mhlanga said in the report. Geopolitical tensions caused by Russia’s war in Ukraine and the conflict between Israel and Hamas that have impacted trade flows, while persistent global inflation has forced central banks to maintain high interest rates and kept the cost of funding for African borrowers elevated, he said.
Seychelles and Mauritius ranked highest in terms of their economic stability and investment climates, and their social and human development indicators, RMB said.
“The top rankings of the Seychelles and Mauritius need special context because of their small economies and populations,” the lender said. “The limited size of these markets is a barrier that many investors will not overcome, despite the many other positives.”
Sign up here for the twice-weekly Next Africa newsletter
When measured by economic performance and potential alone, Egypt topped the rankings, while South Africa’s market accessibility and innovation are considered the best on the continent, RMB said. Given the small size of Seychelles and Mauritius, those two nations rank top overall among nations of substantial size, it said.
“With more than 110 million people, this is a large market that is attractively positioned relative to European markets,” RMB said. “Egypt scores well on economic complexity, innovation, human development and income equality, while scoring poorly on personal freedom.
South Africa’s ranking — which slipped one place from a previous survey conducted in 2021 — was dented by its anemic economic growth, high unemployment and ailing infrastructure that’s weighing on economic output. The outlook for the country may improve if the recently appointed coalition government delivers on a pledge by President Cyril Ramaphosa to accelerate economic reforms.
“Foreign investors will likely wait for evidence that South Africa’s many reform plans and procedures to stabilize multiple dire metrics are gaining traction before investments turn a corner,” RMB said.
Kenya dropped out of the top 10 to rank 11th overall. The East African nation has been beset by political instability in recent months after anti-government activists began regular protests against proposed new taxes, poor governance and state corruption.
“Investors will be watching Kenya’s approach to its lowest metric score: political stability,” RMB said. “Kenya’s ranking of 25 out of 31 countries reflects political and social tensions that flow from inequality and corruption, as well as the security risks that come with ongoing conflict in the region - including the country’s neighbours Sudan.”
You can follow Bloomberg’s reporting on Africa on WhatsApp. Sign up here.
©2024 Bloomberg L.P.
