In 2020, Africa was hit by the worst economic recession in the last 50 years due to the COVID-19 pandemic. The contractions on the continent reached 2.2% in terms of real GDP and 4.6% in terms of GDP per capita. The following year, in 2021, the majority of African economies started to recover but reaching pre-pandemic growth rates in the next few years remains unlikely. Economists see public-private investment as an effective path for economic recovery. This article presents the top 10 African countries in which to invest in 2022.
African Economic Outlook
The COVID-19 pandemic had a significant impact on Africa spawning the worst recession in the last 50 years. In 2020, the total GDP in Africa contracted by 2.2% and by 4.6% in terms of per capita indices.
Nonetheless, considering the fact that the pandemic had a lower-than-expected impact on the region, the recession was not as severe as had earlier been predicted. Economic growth started to improve in 2021 and it was projected to firm up in 2022. In light of the latest events in Ukraine and the worsening conditions on international energetic markets, the estimations will more than likely have to be revised.
The latest United Nations economic outlook suggests that in order for Africa to return to its pre-pandemic economic growth trajectory, it will need to register a yearly GDP increase of about 6% in 2022 and 2023 which is unlikely. The African Development Bank (AfDB) encourages policymakers to implement structural reforms that fortify human capital and improve the investment climate as these factors are key to resilient economic recovery.
Fig. 1. GDP and GDP per capita in Africa, past and projected evolution (%, 2018-2023)
Source: United Nations – Regional developments and outlook. Chapter III Africa.
Top African countries to invest in 2022
A recent report on Where to Invest in Africa 2021 by RMB, an African Corporate and Investment Bank, positions Egypt as Africa’s top investment destination followed by Morocco and South Africa. Some countries, such as Rwanda and Botswana, have moved up notably in the ranking due to significant improvements in their operating and investment environments. Here are the top 10 African countries in which to invest in 2022:
Egypt is the top investment destination in Africa due to successful structural reforms and positive economic trends. It was one of the first countries on the continent to bounce back from the aftermath of the COVID-19 crisis. Currently, the country is rolling out important infrastructure development programs which will provide additional dynamic traction for its economy. The key risks are associated with widespread poverty, social unrest, and the military control of many of the country’s economic dimensions.
Morocco comes in second as the most attractive destination for investment in Africa. Morocco’s economy continues to benefit from political stability and sound measures to combat the consequences of the COVID-19 pandemic. The country directed significant resources to support production activities and public-private investments across all sectors. The key risks to consider relate to external debt and overdependence on remittances.
South Africa remains one of the strongest economies in Africa due to its solid manufacturing and retail bases. The country is also characterized by its competitive financial sector that operates at the global level. The key risks to consider when contemplating investments in South Africa relate to corruption, persistent energy shortages, and social instability.
Rwanda has improved its investment attractiveness significantly in the last few years due to important efforts in improving the country’s operating environment and in achieving relative political stability. The RMB Bank states that Rwanda currently has one of the most attractive business climates on the continent. The key risks to take into account refer to border tensions with neighboring countries and the possible spread of the Ebola virus.
Botswana’s economy shows strong growth potential particularly due to the diamond mining sector. In the last few years, the country has made significant efforts to achieve sound economic diversification and extend public spending on education, health and infrastructure. The high unemployment rate, dependency on the mining sector, and persistent social inequalities are some risks to consider before investing in Botswana.
Ghana’s economy has undergone important structural reforms in the last few years, a fact that made it more resilient in the wake of the COVID crisis. The RMB bank underlines the growth potential of the primary (oil and gold) and the tertiary sectors (service sector). Political stability is another aspect that makes Ghana attractive for investment. A major economic risk to watch is associated with softer credit growth in the private sector.
Mauritius makes an attractive destination for investments because of favorable tax incentives and a strong financial sector. Moreover, the country’s authorities have made considerable efforts to diversify the economy from the business and tourism perspectives. The construction sector is a key driver of the economy, expected to register positive developments in the years to come. Political stability and good governance contribute to a highly competitive business climate at the international level. Some key risks to watch relate to the overdependence on the tourism sector and tax evasion.
Côte d’Ivoire is another attractive destination for investment. Ongoing private-public spending in infrastructure, agri-industry and services support resilient economic growth. The country was awarded the right to organize the 2023 Africa Cup of Nations football tournament which will attract and concentrate more capital in the next few years. The key risks to consider relate to political instability, social unrest, and the risk of debt distress.
Kenya has an attractive business climate and great economic potential. The RMB bank projects that the Kenyan economy will be the fastest-growing in Africa over the next five years. Heavy public investments and the implementation of the Big Four Agenda (industrialization, universal health coverage, food security, and affordable housing) will lead to rapid economic growth. Some key risks to watch relate to the management of the national debt, political tension, and security risks.
Tanzania’s consistent public investment in the secondary and tertiary sectors, as well as important advancements in the telecommunications and finance sectors, have placed the economy on a rapid path of development over the past few years. Moreover, sound management of external debt and an ‘open’ approach towards the pandemic (economic activity was not restricted) allowed the country to avoid heavy economic costs. Economic protectionism, poverty, and security threats are some risks to consider.
The authors of the report relied on several competitiveness indicators and the Economic Freedom Index provided by the Heritage Foundation to build the operating environment score of each country.
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