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Africa Risk-Reward Index November 2018: investment climate strengthens as the continent's growth revives despite barriers from its largest economy
This report now projects a rapid revival in growth in Sub-Saharan Africa (SSA) until the end of the decade which will see a stronger return on investment versus risk
The African investment environment for both business and financial investors is now revived, with a sustained and stable increase in the trade-off between risk and reward as growth in the continent rebounds, the third edition of the Africa Risk-Reward Index of specialist risk consultants. Risks (ControlRisks.com) and Oxford Economics (OxfordEconomics.com) found.
After several years of political and economic turmoil, with the weakest growth since the early nineties, this report now projects a rapid rise in growth in Sub-Saharan Africa (SSA) until the end of the decade that will see a stronger return on investment versus risk. SSA's GDP growth is expected to rise to 3.7% next year, after rising to 2.9% this year from 2.6% in 2017 and 1.1% in 2016. By 2020, SSA growth must reach 4, 3%. Other key economic indicators, such as the level of foreign direct investment, have also increased. Most importantly, the findings of the latest African Risk-Reward Index highlight how recovery in the view of sub-Saharan Africa is not driven by "general suspects" from the region's main economies, especially Nigeria and South Africa.
Along with Angola, the index found that Nigeria and South Africa only saw little improvement in the trade-off risk-reward since the last report in June. This bell with a recent warning from the International Monetary Fund (IMF) that the relatively poor performance of these countries is holding back the wider African economy.
Getting an understanding of investment goals that go beyond the headlines is important
The long-term political changes that have taken place throughout the sub-Saharan Africa region since the end of 2017 have seen the reform agenda driven by new leaders in countries such as Angola and Ethiopia that represent broad positive steps towards future growth. However, the report found that only in Zimbabwe had the current wave of reforms but caused a significant increase in our risk-award score.
Barnaby Fletcher, senior analyst at Control Risks commented, "Since the first edition of the Africa Risk-Reward Index, the continent has experienced dramatic political changes. However, what we see is the ambitious rhetoric of the new leaders is not a substitute for a solid structure and a reasonable policy built over many years. Getting an understanding of investment goals that go beyond the headlines is important. "
Jacques Nel, Chief Economist for East & South Africa at Oxford Economics added: "From an award point of view, the most interesting change in the index since the first edition was improvement by one of the continent's giants, Nigeria, which has emerged from recession thanks to a combination of policy initiatives and recovery of oil prices. This more favorable view is reflected in the latest prize score, which shows it is gaining some land in other African geographies. "
This third edition of the Africa Risk-Reward Index explores the impact of current and future political changes in more detail, with a focus on recent and future elections in Congo (DRC), Nigeria and Gabon, and their potential impact. It also explores a number of smaller markets for investors, considering the prospects of Uganda and Rwanda, two countries with a number of parallels, but where various economic ideologies and leadership styles have seen different trajectories, although the prospects for growth and investment will remain positive for both countries. .
The index also considers the prospects in Tunisia, which has struggled to fully recover from the 2011 Jasmine Revolution, but where there are some early signs that the ambitious reform agenda pursued by the government is starting to have a positive impact.
November 2018 African Risk-Reward Index can be downloaded here: www.ControlRisks.com/ARRI
Distributed by APO Group on behalf of Control Risks Group Holdings Ltd.
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