Latest Africa’s Africa Risk-Reward Index has reflected that investment environment for both businesses and financial investors was now reviving, with a continuing and steady improvement in the trade-off between risk and reward as growth on the continent rebounds.
The third edition of the Africa Risk-Reward Index published by specialist risk consultancy Control Risks and Oxford Economics released on Monday in London, showed that after several years of political and economic turbulence, with the weakest growth since the early 90s, there were indications that an accelerating resurgence in growth in Sub-Saharan Africa (SSA) to the end of the decade will see strengthening investment returns versus risk.
The report noted that currently, sub-Saharan Africa’s (SSA’s) GDP growth is forecast to grow to 3.7 percent in 2019, after picking up to 2.9 percent this year from 2.6 percent in 2017, and an anaemic 1.1 percent in 2016.
Experts project that by 2020, SSA growth should reach a buoyant 4.3 percent while other key economic indicators, such as levels of foreign direct investment, have also been improving.
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.
The index indicated that along with Angola, Nigeria and South Africa had seen only minor improvements in the risk-reward trade-off since the last report in June. This aligns with recent warnings from the International Monetary Fund (IMF) that poor relative performance by these economies is holding back the wider African econonomy.
The report noted further that far-reaching political change occurring across swaths of sub-Saharan Africa since late 2017 had 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.
Commenting on the report findings, senior analyst at Control Risks, Barnaby Fletcher, said: “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”, Fletcher added.
Similarly, Chief Economist for East & Southern Africa at Oxford Economics, Jacques Nel, noted that “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”, Nel added.
According to the risk analysts, the 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.
In addition, 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.
