Broad political change has led to an improvement of the risk-reward score in many Southern African economies, according to the 2018 Africa Risk-Reward Index from Control Risks and Oxford Economics.
Zimbabwe is leading with the largest positive change while Mozambique and South Africa both saw an improvement in the business environment and investor confidence after leadership changes last year and earlier this year.
George Nicholls, Senior Partner for Southern Africa at Control Risks, commented “South Africa, Zimbabwe and Mozambique have seen remarkable changes since the last edition of the Africa Risk-Reward Index published in September 2017.
“In South Africa, investor confidence has improved, following the appointment of Cyril Ramaphosa as state president, as the implementation of policies, intended to consolidate fiscal expenditure and tackle corruption in public institutions and state-owned enterprises, increased opportunities for doing business. But deeply entrenched patronage networks and electoral pressure ahead of the 2019 general elections will mean that it will be a long road to recovery for the country,” he said.
On Zimbabwe, Nicholls said “President Emmerson Mnangagwa announced a series of fiscal and pro-business reforms, leading to the highest improvement of the reward score in Africa. Although Zimbabwe still struggles with a severe liquidity crisis that will not be quickly solved, there has been a notable uptick in investor interest and an upgrading of growth forecasts. However, a degree of political uncertainty persists in light of an upcoming general election and conflicting interests within Mnangagwa’s cabinet.”
“Mozambique recorded the strongest improvement in the reward score after Egypt. It has adopted a pro-investment stance and sought to reduce the state’s involvement in the economy by restructuring or privatising state-owned enterprises. These reforms have helped stabilise a fiscal situation that once looked decidedly shaky, and opened up new opportunities for foreign investors in sectors such as energy, infrastructure construction and transportation,” he continued.
Angola’s leadership change has not yet improved its reward score, but its risk score has gone down. Angola’s new president, João Lourenço, has acted with remarkable speed and decisiveness to consolidate his authority. Efforts to dismantle his predecessor’s networks have provided new opportunities for foreign investment in sectors previously dominated by companies linked to the former president and his family. Combined with an improved regulatory environment, investors can seek opportunities predominantly in the oil and gas, diamond, and telecommunications sectors.