A new report by Rand Merchant Bank, a subsidiary of South Africa’s FirstRand Bank Limited, says Nigeria dropped all of seven spot on its 2017 Investment Attractiveness Index, falling out of the top-10 for the first time in 15 years.
With its 2017 score dropping from 5.67 in 2016 to 5.32, the report ranked the country 13th out of 53 African countries, behind Egypt, which moved to the top spot with 6.35 from a previous score of 6.21, which enabled it displace South Africa with 6.33, down from 6.27; while Morocco remained in the third position, after its 2017 score climbed to 6.12 from 6.04.
According to the report, RMB said the index “provides a means by which to assess the most appealing of African investment destinations. The index does this by overlaying macroeconomic fundamentals with the pragmatics of doing business on the continent.”
Explaining the ranking further, RMB noted that Egypt seized the number one spot, displacing South Africa, “due largely to its superior economic activity score. Despite its fragmented political landscape and the threats to its institutional independence, (even while) South Africa remains a bastion of good business practice.”
The report blamed the nation’s recessionary conditions that “eroded its short-term investment appeal. Despite the many challenges it faces though, the West African giant is still regarded as a viable long-term investment option, as evidenced by the improvement in FDI inflows in 2016. The Nigerian economy’s expected recovery over the forecast period is set to push the nation back into the Top 10 rankings in time to come. Implementation of the government’s Economic and Growth Recovery Plan should garner greater investor confidence — provided there is policy continuity ahead of the 2019 presidential election.”
The methodology, RMB noted, is straightforward and encapsulates what the bank perceives to be the most important conditions for viable investment in Africa like: “Economic activity, expressed as a weighted average of market size and forecasted levels of GDP growth (and) the operating environment, depicted as a weighted average of four international surveys that measure the ease of doing business.”
According to the index, Ethiopia jumped from seventh position in 2016 when it scored 5.63, to fourth with 5.72; displacing Ghana, which moved a step lower as its score fell to 5.69 from 5.71; just as Kenya lost a spot at sixth position with its 5.68, same as 2016.
Tanzania moved from 9th to seventh as it scored 5.59 from 5.54; Rwanda climbed to eighth from 12th, with its score improving from 5.43 to 5.53; Tunisia improved from 5.50 which earned it 11 position in prior year to 9th; Cote d’Ivoire dropped from eight to 10th spot following its drop in score from 5.57 to 5.51.
Uganda jumped also from 15th rank to 11th, after its score improved to 5.40 from 5.22; while Mauritius followed Nigeria, after retaining its 14th position with its score dropping from 5.33 to 5.24; just as Algeria dropped five spots from 10th to 15th position with a score of 5.20, down from the previous 5.50.
While noting that there was insufficient data for Somalia to be rated, RMB ranked South top from the rear of the table after its score dropped from 2.32 to 1.72; followed by Equatorial Guinea’s 2.21 score which earned the bottom spot in 2016 to 2.44; Burundi dropped from a score of 3.27 and 44th position in 2016 yo 2.48 or 51st position this year.
Factors considered in the ranking and weight attached, RMB explained includes market size (standardized and rescaled to a score out of 10 (60); and economic growth, standardized and rescaled to a score out of 10 (40%. Both of these counts, which are “economic activity” are weighted aggregation of standardized variable gets 50%.
The second part- the operating environment (linear aggregation of standardized variables) gets the remaining 50%, which is further computed from scores from a country’s ranking on the doing business index- standardized and rescaled to a score out of 10 (25%); global competitiveness index- which gets also 25%; and economic freedom index (25%).