Ghana among the top 10 investment destinations in Africa in 2019

Company News of Monday, March 25, 2019

Source: First National Bank Ghana

2019-03-25

Ghana remains one of the top 10 investment destinations in Africa, even after the worst banking crisis in its history.

Studies by Rand Merchant Bank Ltd., RMB (Corporate and Investment Banking Division of FirstRand Limited) show that growth will be driven primarily by the hydrocarbon sector, with a continued increase in oil and gas production expected .

The Johannesburg-based RMB said in its latest annual study, Where to invest in Africa: "Ghana has strong growth rates focused on the oil and gas sector, while growth of the non-oil sector is supported by favorable reforms to businesses ".

However, Ghana rose from fifth to ninth in the ranking in 2019 following a downward revision of its growth rate for 2018 by the International Monetary Fund (IMF) and the need for the country to address the weaknesses of its banking sector, according to badysts of the RMB Co-authors of the study, Celeste Fauconnier and Neville Mandimika.

"The competing economies have seen greater improvements in the economic and operational environment indices," said Fauconnier and Mandimika. "Structural soundness could help Ghana reach its growth forecast for 2019."

Ghana's Ministry of Finance is forecasting an economic growth rate of 7.6 percent this year. In April 2018, the IMF reduced the outlook for 2018 from an estimated 8.9% in October 2017 to 6.3%. The statistical agency will release figures for the fourth quarter growth rate and preliminary annual figures on April 17.

The findings of the eighth edition of Where to Invest in Africa show that effective infrastructure is critical to unlocking opportunities and unlocking Africa's growth potential.

According to the World Bank, the lack of efficient infrastructure reduces by 2.6% average per capita growth rate in Africa and weighs heavily on human development.

The latest estimate of the African Development Bank's infrastructure needs is between $ 130 billion and $ 170 billion a year, but available capital on the continent is insufficient to meet this goal, said Fauconnier. She adds that this shortfall represents an opportunity for companies involved in the development or financing of infrastructure projects.

In badessing the most attractive investment environments in Africa, the RMB has once again considered two important conditions for sustainable investment: economic activity and the operating environment.

Even though there have been changes in the top 10 rankings this year, the top three countries of last year – Egypt, South Africa and Morocco – have maintained their position in terms of the attractiveness of investments. Egypt has maintained first place as the largest African market in terms of gross domestic product, with the largest consumer market in the Middle East and North Africa. Its economy is diversified and receives significant foreign direct investment.

"Progress has been made in improving the legal environment and investments, and growth is expected to reach 4 percent," said Mandimika. "The availability of hard currency for debt service and the depreciation of the Egyptian pound since its IPO in 2016, however, remain some of its challenges."

South Africa has also retained its second position. According to Mr. Fauconnier, the country is currently a favorite place for foreign direct investment. President Cyril Ramaphosa's efforts to develop a $ 100 billion US and national investment portfolio are on track.

The country's currency and financial markets remain above the rest of other African countries, she said, warning that moderate economic growth and the upcoming elections in 2019 have created political divisions that hinder policies.

Morocco remains the third largest market in Africa, the fifth largest market in Africa. With an expected growth rate of 4% in the medium term, Morocco's operational environment and investment attractiveness have been considerably strengthened since the "Arab Spring", its reintegration into the African Union and its accession to the Economic Community. States of West Africa.

The badysis of the different African countries in the report revealed that 11 African countries should exceed 6%. Ethiopia is expected to be the fastest growing economy in Africa, averaging 8.2 percent over the next six years. This sustained momentum is supported by improved macroeconomic policies and increased public investment in local industries and human capital. Private investment continues to rise after the resolution of the long-standing dispute with Eritrea. Other countries outperformed for similar reasons in Ethiopia are Rwanda and Côte d'Ivoire.

Some sectors offer long-term growth prospects. Resources will continue to play a leading role in attracting funds, particularly in the areas of hydrocarbons, base metals and precious metals.

"The agricultural sector will become a more attractive investment objective as the agri-food processing sector grows and global food demand increases dramatically," said Mandimika. "The equally important demographic dividend, especially the strong population growth, urbanization and GDP per capita, also offers growth prospects."

RMB also identifies other growth opportunities. From a fiscal point of view, the level of revenue collection is low in Africa; and the IMF estimates that sub-Saharan Africa could potentially collect 3 to 5 percent of additional GDP in tax revenue by improving collection systems and expanding the tax net.

It takes time to solve these problems because there has been no real progress in the operational environments. Victor Yaw Asante, head of corporate, business and enterprise banking at First National Bank Ghana – the local RMB unit, said the lack of access to financing, corruption, poor governance and inadequate and efficient infrastructure remained fundamental problems for doing business in Africa.

"In Ghana, for example, private sector investment is weak and could change with more business environment reforms, more development of infrastructure and financial markets," he added.

The top five countries in terms of operating environment were Mauritius, Rwanda, Botswana, South Africa and Seychelles. Mauritius is now in its eleventh year of being the easiest business environment in Africa.

Top 10 ranked countries in terms of investment attractiveness

First National Bank will host its 4th Economic and Business Breakfast Forum on Tuesday, March 26, 2019 at the Movenpick Ambbadador Hotel in Accra. RMB badysts and study co-authors Celeste Fauconnier and Neville Mandimika will present the latest findings from Where to Invest in Africa 2019, with a focus on Ghana's economic future.