Sub-Saharan Africa is becoming a stable market for investment

27 November 2018 2 min. read
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London-based risk and compliance consultancy Control Risks has released the November edition of its Africa Risk Reward Index, and predicts increased returns on investment for businesses in Sub-Saharan Africa (SSA) in the near future, driven by economic growth and increasing political stability.

Control Risks’ periodic Risk Reward indices for Africa provide an overview of the potential returns on investment in a region, based on a combination of economic growth forecasts, current sizes of the regional economies and the overall regional demographic structure.

In June, the firm released an index that portrayed East Africa as one of the most stable regions on the continent, not only due to a relatively high degree of political stability, but also due to an increasing propensity towards economic diversification. Now the firm has found a promising future in store for SSA.

Africa Risk Reward Index

In the domain of economic growth, SSA is set to excel in the near future, given that the regional GDP is expected to grow by 3.7% over the next year, as opposed to a growth rate of 2.6% last year. This growth trend appears to be the continuation of a trend, given that the GDP grew by only 1.1% in 2016.

If the current rate of growth continues, the firm predicts that the growth rate of SSA’s GDP will increase to 4.3% by as early as 2020. The region has demonstrated a similarly strong performance in the other criteria measured for the Risk Reward Index, including a substantial increase in foreign direct investment.

Nevertheless, a striking aspect of the report’s findings is that the growth has been driven by emerging regional economies such as Angola and Ethiopia rather than the traditionally strong economies such as Nigeria or South Africa. This shift is primarily due to positive changes in the political structures and consequently the policies in these countries.

Commenting on the index, Senior Analyst at Control Risks Barnaby Fletcher said, “Since the first edition of the Africa Risk-Reward Index, the continent has seen dramatic political changes. However, what we are seeing is that ambitious rhetoric from new leaders is no substitute for solid structures and sensible policies built up over many years. Obtaining an understanding of an investment destination that goes beyond the headlines is therefore crucial.”