|Scooped by homestrings|
Africa has a particularly rich heritage. It is fondly remembered as the cradle of civilization because of the influence Egypt exerted over the rest of the world in ancient times. In more recent times, Africa has become an “economic mega block‐buster” offering some of the highest returns on Foreign Direct Investment in the world today.
A lot of studies, research and analysis have been conducted on the African continent and rightfully so. Investors continue to be wooed by the potentials embedded therein as more and more reports on Africa are reveal a steady upward trend in investment inflow. The continent, despite its well-publicized challenges, is being touted as the World’s top destination for investment flow.
Africa’s countries, however, do not offer the exact same potential returns for all categories of investment. A way of segmenting the countries would be to divide them into “high risk, high rewards” and “low risk, high rewards.” Both categories bear enormous potential, but differing levels of risks and economic stability.
Some characteristics of the Low Risk, High Rewards economy include Diversified economies, relative macroeconomic and political stability, relatively low incidents of insurgency.These countries are South Africa, Tunisia, Morocco, Kenya, and Ghana.
The risk of operating in these geographies is relatively low and the returns continue to be high. These are the most attractive spots on the continent, but the question of sustainability should be asked especially as other regions continue to develop economically.
High Risk economics hold traits such as they are mostly oil producers or have relatively non‐diversified economies, lower levels of macroeconomic and political stability than their counterparts in the low risk, high rewards category and higher levels of insurgency with the potential to cripple economic potential.
In this category you can find countries like Nigeria, Egypt, Angola, Uganda, and Tanzania.
These countries, surprisingly, do not attract significantly lesser investment than their more stable counterparts. In fact, over a four year period from 2007‐2011, these countries have received similar attention in terms of investment. For instance, Angola and Tunisia received similar investments over the four year window, the same hold for Morocco and Egypt.
Nigeria also is said to be the top gainer of foreign investment despite the heightened insecurity challenge it faces. This has been largely attributed to the country’s huge consumer space, with population exceeding 170 million people.
With more cooperation between African governments in promoting macroeconomic and political stability as well as curbing insurgency, we can expect to see more economic fortunes arise from the African continent.