East Africa Offers Highest Rewards for Investors in Africa

Improving relations between the government and the opposition will be instrumental in ensuring that political tensions do not undermine economic growth in Kenya.

East Africa Offers Highest Rewards for Investors in Africa

By Irene Gaitirira
Published July 8, 2018

Government plans include expanding Ethiopian Airlines’ footprint of regional and international routes and Addis Ababa international airport is also undergoing expansion that will enable it to service 20 million passengers a year by 2019. East Africa offers investors a reward score above the African continent’s average.

“Ethiopia with its impressive reward score of 7.94 out of 10 offers opportunities for investors specifically in the agriculture and manufacturing sectors which continue to demonstrate high levels of growth,” says Daniel Heal, Senior Partner for East Africa at Control Risks. “The government’s new privatisation push in the energy, telecoms and logistics sectors also offer new and exciting opportunities for investors. However, its risk score of 5.79 is also above the continents average of 5.54 due to the ongoing political transition under new Prime Minister Abiy Ahmed, who will need to delicately balance the interests of the political elite with opposition demands for the opening of political space.”

Africa Risk-Reward Index 2018 from forecasting and quantitative data analysis consultancies Control Risks and Oxford Economics shows Ethiopia and Tanzania topping the list of the top rewarding economies for the second time, with Kenya following in fourth position. Heal notes that “Tanzania remains an interesting but volatile target for potential investors” with “a high risk score of 5.72” due to “President John Magufuli’s rising autocracy and several legislative changes” that give “the administration permanent sovereignty over mineral wealth as well as the ability to renegotiate exploration and production agreements, increase its shareholding in mining companies and increase mining royalties” as it raises “concerns within the international investor community.”

Tanzania is a volatile target for potential investors with a high risk score of 5.72 due to President John Pombe Magufuli Joseph’s rising autocracy and several legislative changes that give the government permanent sovereignty over mineral wealth as well as the ability to renegotiate exploration and production agreements, increase its shareholding in mining companies and increase mining royalties The report says that Kenya’s reward score is one of the highest in sub-Saharan Africa and that improving relations between the government and the opposition will be instrumental in ensuring that political tensions do not undermine economic growth. It notes that more prudent fiscal and macroeconomic policies are needed to maintain positive economic prospects.

Improving relations between the government and the opposition will be instrumental in ensuring that political tensions do not undermine economic growth in Kenya. “Uganda ranks among the top economies in the 2018 Africa Risk-Reward Index when it comes to positively changing its scores. Relative political stability under President Yoweri Museveni means that priority national projects such as oil production or infrastructure projects face few policy or bureaucratic delays. While the prospects for economic growth have improved following the end of a regional drought and the election period in neighbouring Kenya, concerns over a deteriorating security environment mitigate the otherwise improved risk score.”