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<p>Ethiopia pipped Kenya last year as the largest recipient of Foreign Direct Investment (FDI) within the East African region, according to a new report released by financial consulting firm Ernst and Young. Ethiopia attracted $7 billion compared to Kenya&#8217;s $2 billion. On the reforms that are making Ethiopia a top investment destination, Global Chairman of Fairfax Africa Fund, Zemedeneh Negatu joins CNBC Africa&#8217;s Arnold Kwizera for more.</p>


Ethiopia beats Kenya to top FDI destination in East Africa

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<p>This week South Sudan celebrated their 8th Independence Day, as the youngest country in the world, you can imagine there&#8217;s a long agenda of priorities to get through and financing them remains a challenge. With a sometimes tumultuous past, the country can be perceived as insecure or unpeaceful and Wek Bol and his team at Africa Business Connect (ABC) believe that to be one of the main obstacles for the country in securing the Foreign Direct Investment (FDI) that they need going forward. He joins CNBC Africa for more.</p>


How can South Sudan attract more foreign direct investment?

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<p>According to EY Global’ s 2018 Africa Attractiveness report, East Africa recorded a 82 per cent increase in the number of FDI projects amounting to 30 per cent of the continents total FDI with 197 projects. Joining CNBC Africa for more on the regional attractiveness is Anu Shah, founder of EFI Hub.</p>


How East Africa emerged as the leading destination for FDI

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<p>Tseke Nkadimeng, CEO, Africa Oil spoke to CNBC Africa on the expectations from the upcoming South Africa Italy Summit.</p>


SA to host Italy in a bid to boost trade relations between countries

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<p>Joining CNBC Africa to discuss the challenges, expectations and the best route to improving African investment is Hubert Danso, CEO and Vice Chairman at Africa Investor.</p>


What’s holding back African investment growth?

<p><em>Mthuli Ncube, Head of Research, Quantum Global Group</em></p>
<p>Foreign investors are increasingly becoming aware of the tremendous potential and financial reward the African continent offers. Foreign Direct Investments (FDI’s) deliver a number of important contributions to economic development in terms of employment and foreign exchange. In 2016, Africa benefitted from USD 51 billion of FDI. There are various investment opportunities that will generate investor returns whilst contributing towards economic and social development such as Agribusiness, Infrastructure and Healthcare amongst many other areas. Global investment firm Quantum Global has recently developed an innovative tool designed to guide investors on the most attractive African markets for investment in the short to medium term.</p>
<div id="attachment_106420" style="width: 810px" class="wp-caption alignnone"><img aria-describedby="caption-attachment-106420" decoding="async" loading="lazy" class="wp-image-106420 size-full" src="http://cnbc.africa/wp-content/uploads/2017/03/Africashutterstock_110973782.jpg" alt="" width="800" height="600" /><p id="caption-attachment-106420" class="wp-caption-text">Photo: Shutterstock</p></div>
<p>Each component of the newly developed Africa Investment Index (AII) (Growth, Liquidity, Risk, Business Environment, Demographics and Social Capital factors) enables for calculation of the risk premium for each African country – therefore presenting a more substantial case when considering African investment opportunities. Countries are then ranked in the AII according to their score.</p>
<p><strong>Growth Factors</strong></p>
<p>Sub-Saharan Africa’s growth is predicted to continue to rise throughout 2018, including in low-income countries such as Ethiopia, Tanzania and Rwanda who are currently at the forefront of African growth. The AII’s <strong>Growth Factors</strong> look specifically at Domestic investment (as % of Gross Domestic Product), the size of an economy as well as economic growth. Kenya for example, is ranked in the AII as the fifteenth most attractive economy for investments, but in terms of <em>economic growth</em>, the country ranks sixth. Kenya’s growth performance has been driven by strong domestic demand and public infrastructure investment in a context of low oil prices and domestic macroeconomic stability. Domestic consumption has been growing rapidly on the back of a growing middle class, rising incomes and rapid expansion of credit. Both the World Bank and International Monetary Fund (IMF) are forecasting growth in Kenya for the next 3-4 years. Kenya’s travel and tourism industry is a strong component of this growth. According to the <a href="https://www.wttc.org/-/media/files/reports/economic-impact-research/countries-2017/kenya2017.pdf">World Travel and Tourism Council’s 2017 report</a>, this sector is expected to have risen by 6.0% in 2017 and will account for 10% of the country’s GDP –which is almost the same as Kenya’s banking sector.</p>
<p><strong>Liquidity Factors</strong></p>
<p>The AII measures <strong>Liquidity Factors</strong> according to the level of domestic real interest rates and excess money supply, with the latter denoting the money that is available in the economic system, and theoretically positively influences consumption, spending and ultimately GDP. In the AII, South Sudan is rated first for both <em>real interest rate</em> and <em>excess money supply</em> in the Liquidity Factors, but is also ranked amongst the least attractive economies for investment overall. According to the World Bank Group, livelihoods in South Sudan are concentrated in low productivity, unpaid agriculture and pastoralist work outside of the oil sector. The slump in the oil and gas prices has thus impacted South Sudan’s financial sector and led to a decrease in the available liquidity for energy projects and other investments. The IMF argues that in order for South Sudan to steady inflation, peace resolutions to conflict, fiscal deficit, exchange rate stability and a recovery in both oil production and non-oil GDP would need to be achieved.</p>
<p><strong>Social Capital factors</strong></p>
<p>The AII uses a <strong>Social Capital Factor</strong> which looks specifically at the level of knowledge, networks and connections in a given country, with Facebook penetration used as a proxy. It is no secret that strong local relationships play a huge role in a business’s successful integration and growth on the continent. African businesses have begun populating Twitter, Facebook and other forms of social media, bringing new, varied narratives and thus business opportunities to the forefront. The high penetration of Facebook on the continent will help boost financial inclusion, with increased virtual communications which is creating further business and investment opportunities. The AII’s Social Capital factor is an innovation as no other investment index or doing business guide takes such a factor into consideration when considering African investment opportunities. Tunisia ranks first in the AII’s Social Capital Factor. And while North Africa is a region where revolutions in the forms of the Arab uprisings were accelerated through the use of Social Media, there are strong indicators that the applications for business purposes are now equally strong. Morocco’s Digital Program 2020, which was developed last year is just one of the examples of an African country using the digital economy as a building block.</p>
<p><strong>Risk Factors</strong></p>
<p>The AII takes into account <strong>Risk Factors </strong>which measure a country’s credit rating standing, risk of currency depreciation (as measured by inflation differentials), import cover ratio (capturing the risk of foreign currency reserves required to cover critical imports), current account and external debt levels. Sub-Saharan Africa and especially its oil-exporting economies, has seen many credit downgrades and lowered growth outlooks in 2016, raising the importance of financing for development even higher. Foreign investors and businesses working in Africa encounter daunting economic, political and social risks that reduce their ability to make mid to long-term investment decisions. Investors value balanced, consistent, and predictable regulation in a given country. For instance, South Africa’s credit rating was downgraded by S&amp;P and Fitch to BB+ (junk investment status) in March and April this year, and by Moody’s to Baa3 due to rising political and institutional risks which is threatening the growth outlook. Irrespective, South Africa, Africa’s second largest economy is ranked fourth on the AII, scoring very well on growth factors (size of GDP), ease of doing business and the demographic factor (size of population).</p>
<p><strong>Business Environment Factors</strong></p>
<p>The AII categorises the <strong>Business Environment Factors</strong> according to the ease of doing business in a given country. It is constructed from macroeconomic and financial indicators and the World Bank Group’s Ease of Doing Business indicators.  Mauritius, which ranks first on the AII’s business environment factors benefits from its long-established links in Africa and position as a natural conduit for exponential growth in the emerging Africa trade corridor. It is a stable and mature democracy, which has actively sought and welcomed foreign investors and businesses for many decades and is strategically positioned and built on more than two decades of expertise in cross-border finance. Various African focused investment firms such as Quantum Global have already set-up a homebase in Mauritius in order to bring them closer to investment opportunities on the continent.</p>
<p><strong>Demographic Factors</strong></p>
<p>Afric’s demographic dynamics are shaping its present and future development agenda and the trends will vary from country to country. The population currently stands at 1.2 billion and some of the most populated countries include Nigeria, Ethiopia, Egypt and the Democratic Republic of Congo. The AII uses the <strong>demographic factor</strong> which accounts for the size as well as the potential market at present and in the future. According to the IMF, the number of Africans joining the working age population will exceed that of the rest of the world combined by 2035. A growing population as well as a rising new middle class is fuelling demand for new infrastructure investments as part of the urbanisation process.</p>
<p>Uganda for example, which has a population of over 38 million, has one of the youngest and most rapidly growing populations in the world. The country ranks 12<sup>th</sup> in the AII overall and 10<sup>th</sup> in the AII’s demographic factor. The population increase will further strain the availability of arable land and natural resources and overwhelm the country’s limited means for providing food, employment, education, health care, housing, and basic services. Currently Uganda’s rate of urbanisation stands as 5.43% annual rate of change (2010-15 est.), highlighting the growing demand for goods and services as well other infrastructural investments.</p>
<p>The case for African investments is becoming an increasingly discussed topic given the intricacies and nuances of doing business in each individual African country. Some existing tools such as the World Bank’s Doing Business Index (used as a subset in the AII) which ranks individual countries according to the <em>Ease of Doing Business Ranking</em>, do demonstrate some degree of correlation between the AII’s indices and indicators.</p>
<p>The AII however is the most comprehensive index yet to assess countries for their investment attractiveness. It goes beyond any other index by taking into account the size of an economy, size of population and risks – in particular exchange risks, debt and liquidity, and will also look at indicative pricing for deals and transactions and the valuation of Private Equity multiples. The social capital factor is also an innovation, as no other index has taken such a factor into consideration. The risk in the real sector of the economy is captured by the spread in liquidity factors, between the lending rate and the risk-free Treasury bill rate, in a country. Adjusting this spread with factors such as GDP size of the economy, demographics, ease of doing business, Facebook penetration, then yields a risk-premium for the country. This then enables the calculation of a ball-park Price-to-Earnings multiple appropriate for each country. In conclusion, the AII not only enables the ranking of countries in terms of attractiveness for investments but gives a guide on the pricing of risks and the valuation of investment deals in a country.</p>


Op-Ed: Top 6 factors not to ignore when investing in Africa

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<p>Foreign investments into Nigeria shot up by 147 per cent year on year in the third quarter of 2017. Chamberlain Peterside, CEO of Xcellon Capital Advisors joins CNBC Africa to review FDI and FPI activities in Nigeria this past year.</p>


Nigeria reports increase in foreign direct investment in Q3

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<p>Sub-Saharan Africa implemented 83 business reforms last year according to the Doing Business 2018 report by the World Bank. Mauritius, Kenya, Botswana and South Africa are among the countries that ranked highest in the region.</p>


Sub-Saharan Africa economies set new record for number of business reforms

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<p>Sub-Saharan Africa implemented 83 business reforms last year according to the Doing Business 2018 report by the World Bank.</p>


Africa prioritising private sector development to boost growth – World Bank

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<p>Kenya’s foreign direct investment projects went down by 57.9 per cent in 2016.</p>


Kenyan foreign direct investment outlook

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<p>Investors will be looking to the Finance Minister Malusi Gigaba&#8217;s Medium Term Budget Policy Statement tomorrow to provide more certainty about government&#8217;s commitment to fiscal consolidation, growing the economy and reforming State-owned enterprises.</p>


Guidance for Gigaba

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<p>On Money Monday segment we look at bilateral ties between SA and Italy and discuss some investment opportunities companies in both countries can exploit. Nico De Kock, Spokesperson of The European House of Ambrosetti joins CNBC Africa for more.</p>


SA and Italy explore investment opportunities

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<p>Special adviser to the Lagos State Governor on Investment and Overseas Affairs, Ademola Abass says the state is creating investor confidence to attract the needed investment. CNBC Africa&#8217;s Oyedamola Akinsanya caught up with him on the side-line of th</p>


Lagos State committed to attract more investors – Ademola Abass

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<p>In a bid to strengthen ties between Nigeria and Belgium, the Belgian Government rolled out plans to facilitate more high-level economic missions from Belgium into Nigeria earlier this year, with Antwerp having the second largest port in Europe. But how successful has this strategy been? CNBC Africa spoke to Stephane de Loecker, the Belgian Ambassador to Nigeria to discuss this and more.</p>


Belgium, Nigeria look to strengthen trade ties

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<p>Nigeria is finally out of the recession, but what opportunities or incentives can Nigeria&#8217;s small and medium enterprises take advantage of to stay ahead?</p>


Opportunities for SMEs in Nigeria

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<p>A survey by the Institute of international finance has shown that foreign investors cut capital flows to emerging markets debt and equities market in August, reducing inflows to $15.8bn on investor caution and profit taking.</p>


Foreign investors cut capital flows to emerging markets debt

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<p>An eight-member US congressional delegation visited Lagos in a bid to strengthen U.S-Nigeria relations. CNBC Africa caught up with Tonye Cole, CEO of Sahara Energy when the delegates visited the Egbin Power Plant.</p>


FDI

Ethiopia beats Kenya to top FDI destination in East Africa

How can South Sudan attract more foreign direct investment?

How East Africa emerged as the leading destination for FDI

SA to host Italy in a bid to boost trade relations between countries

What’s holding back African investment growth?

Op-Ed: Top 6 factors not to ignore when investing in Africa

Nigeria reports increase in foreign direct investment in Q3

Sub-Saharan Africa economies set new record for number of business reforms

Africa prioritising private sector development to boost growth – World Bank

Kenyan foreign direct investment outlook

Guidance for Gigaba

SA and Italy explore investment opportunities

Lagos State committed to attract more investors – Ademola Abass

Belgium, Nigeria look to strengthen trade ties

Opportunities for SMEs in Nigeria

Foreign investors cut capital flows to emerging markets debt

U.S. Congressional delegation visits Nigeria

News Tips

Advertise With Us

FDI

Ethiopia beats Kenya to top FDI destination in East Africa

How can South Sudan attract more foreign direct investment?

How East Africa emerged as the leading destination for FDI

SA to host Italy in a bid to boost trade relations between countries

What’s holding back African investment growth?

Op-Ed: Top 6 factors not to ignore when investing in Africa

Nigeria reports increase in foreign direct investment in Q3

Sub-Saharan Africa economies set new record for number of business reforms

Africa prioritising private sector development to boost growth – World Bank

Kenyan foreign direct investment outlook

Guidance for Gigaba

SA and Italy explore investment opportunities

Lagos State committed to attract more investors – Ademola Abass

Belgium, Nigeria look to strengthen trade ties

Opportunities for SMEs in Nigeria

Foreign investors cut capital flows to emerging markets debt

U.S. Congressional delegation visits Nigeria

News Tips

Advertise With Us

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