Gone are the days when executives and investors could go anywhere on the African continent and find growth. Now it’s so important to understand the unique situation in each market to achieve success.
Using the 2019 World Bank Ease of Doing Business report, major political events to come in 2019 and macroeconomic factors in each country, we have identified ten countries that executives and investors should consider in their Africa strategy for 2019.
Rwanda is one of Africa’s fastest-growing economies with growth averaging more than 6 per cent every year since the turn of the century. Last year, it recorded the most business reforms in the region. The world bank says it has “carried out the most reforms since the inception of Doing Business 16 years ago.”
One major point of improvement pointed out in world bank’s Doing Business 2019 is the ease of starting a business in Rwanda. It has replaced its bureaucratic structures with an electronic system. Last year, it replaced its stifling special billing machine system for value-added tax invoices with free software that allows taxpayers to issue value-added tax invoices from any printer. Also, the country is only second to New Zealand in the ease of property registration in the world.
The country was one of the world’s best performers in the areas of Getting Credit and Starting a Business, according to the world bank. In just two years, the country has moved 31 spots in the overall the Doing Business ranking. One major reform the government initiated was the introduction of a new law which improved the ease in accessing credit for businesses. The Kenyan government has also been collaborating with IBM to develop technological solutions for its agencies that have since resulted in making registration of property easier by introducing an online system to pay fees and obtain digital certificates.
Kenya’s economy is expected to continue growing at 6.1 per cent, according to the International Monetary Fund (IMF) projections or 5.9 per cent for the world bank’s prediction. What’s almost certain is that the country would remain East Africa’s leading regional hub for information and communication technology, financial, and transportation services.
Since the smooth transition to the Nana Akufo-Addo government in 2016, the government has promoted private sector-led growth to revive the non-oil and non-agricultural sectors. Commodities including oil, gold and cocoa have been the mainstay of Ghana’s $47 billion economy. The rapid economic growth it has also enjoyed over the last few years have been closely linked to oil since it became a producer in 2010. Ghana has been under the watchful eye of the IMF since the $918 million credit deal agreed in 2015. The current programme is to end 2018. The government says it’s working hard to build a resilient and robust economy to avoid a return to the IIMF for financial bailout.
The world bank’s doing business report says Ghana had further simplified the process of importing. It now has a paperless customs clearance processing system.The country moved six places up in the overall index.
The world’s largest exporter of cocoa beans has made significant progress in its business environment in recent years building on gains of a stable political environment. The country was one of the top 10 improvers in the world in the Ease of Doing Business rankings. Over the last two years, it has reduced processing time for building permits and has introduced a new system for electronic payment of taxes and a credit bureau. Last year, it introduced online systems for filing corporate income tax and value-added tax returns, according to the world bank.
The agro-based economy is expected to maintain a steady growth rate of 7 per cent or above in the coming year. It’s relatively developed road network and port, the second largest in West Africa, puts it in a favourable position to attract investments in 2019.
This landlocked country of over 100 million people on the Horn of Africa is transforming itself into Africa’s manufacturing hub. The Ethiopia government is luring investments with tax incentives, infrastructure investment, and cheap labour. Industrial parks construction is also part of the government’s plan. It already has six industrial parks and still looks to set up nine more across the country in the coming years.
Ethiopia has also gone through a historic political transformation after welcoming a new reformist prime minister, Abiy Ahmed, in April. He sought to open up the economy to private investments. He announced plans to sell minority stakes in state monopolies such as Ethio Telecom and Ethiopian Airlines Enterprise, the continent’s biggest airline, as well as Ethiopian Shipping & Logistics Services Enterprise to foreign and domestic investors. The IMF forecasted Ethiopia would be Africa’s fastest growing economy in 2019, with a projected 8.5 per cent growth rate.
The Ethiopian Investment Commission (EIC) launched an online investment guide, iGuide, in December 2018. The platform, created with support from the United Nations Economic Commission for Africa (ECA) and the United Nations Conference on Trade and Development (UNCTAD), will help investors discover opportunities in the country, business costs, key procedures and laws.
This tiny island country has one of the smallest market sizes on the continent, which means some investors tend to ignore it. However, the state has consistently ranked higher than other African countries in ease of doing business. It currently ranks 20th in world bank’s ease of doing business index.
Mauritius’ stable political system, liberal financial sector and low taxes which encourage business formation have made it an ideal environment for investors who prefer a business-friendly and less risky investment environment.
Mauritius signed a full free trade agreement (FTA) with China last year – Africa’s first formal FTA with China – and has expressed an interest in becoming a transhipment and financial hub on China’s Maritime Silk Road trade route. Mauritius has already agreed on a formal trade agreement with three African trade blocs — Common Market for Eastern and Southern Africa, Southern African Development Community and the East African Community.
Morocco is not only famous for its vibrant culture, superb cuisine and awe-inspiring landscape but also its friendly business environment. The greatly enhanced operating environment has served Morocco well to become a favourable position as a financial hub and platform from which European countries can access the African market. Between 2011 and 2019, Morocco climbed from the 114th place to the 60th place in the Ease of Doing Business ranking, indicating sustained improvements to the business climate.
The central bank of the Kingdom of Morocco expects a 3.1 per cent expansion in 2019. Tourism and manufacturing are expected to be the key growth drivers of the economy. The manufacturing sector is also expected to benefit from substantial foreign investment into the autos and aeronautics industries.
Africa’s biggest economy might not have so much short-term investment appeal due to low economic growth and high political risks. A lot hinges on the elections in 2019. The vote in mid-February would be a choice between President Muhammadu Buhari, who’s currently struggling to grow the economy after it plunged into recession in 2016, and former Vice President Atiku Abubakar, posturing as a pro-business alternative. We expect investors to adopt a ‘wait and see’ approach before attempting to come into the market.
Even though Nigeria dropped one position lower in the ease of doing business index, Nigeria was among the forty-six economies in the world that improved across three or more categories the world bank considers in its analysis. Notably, in two states, Lagos and Kano, starting a business was made easier by reducing the time needed to register a company at the corporate affairs commission and introducing an online platform to pay stamp duty.
Africa’s second largest economy is one of the easiest places to do business on the continent with advanced legal and financial structures. However, Africa’s most industrialised economy has been struggling to grow until it eventually plunged into a recession in the second quarter of 2018. The euphoria from Ramaphosa’s ambitious statements on reforms to rescue the economy has since cleared off.
Ramaphosa unveiled a “stimulus and recovery plan”, but his plans could be hampered by the general elections next year. The governing African National Congress (ANC), which has to contend with corruption allegations against Jacob Zuma, the former president, would be facing huge credibility and popularity test in the May elections. The country, which grew by only 0.8 per cent in 2018, also has to deal with struggling state-owned firms like power firm Eskom and South African Airways (SAA).
Egypt snatched first position from South Africa in the 2018 investment attractiveness index by Rand Merchant Bank, one of Africa’s leading diversified financial services provider. Since North Africa’s largest economy recovered from the Arab Spring, it started implementing an economic reform programme backed by a $12 billion (Dh44bn) loan from the IMF in late 2016. Under the programme, the country introduced new taxes and floated the currency with the intention to overhaul the economy, boost investor confidence and restore stability to capital markets.
The country had fallen six places in the World Bank’s “Doing Business Report 2018” but was quick to issue some policy announcements in the weeks after the publication. Those reforms dragged it eighth places up in the 2019 edition of the report. The world bank noted that the country carried out five business reforms in 2017, which is the highest number to be carried out in Egypt in one year within the past decade. Notable among the reforms are reducing the time to start a business to 11 days now, from 16 days earlier; and strengthening corporate transparency to protect the rights of minority investors.