Africa Invenstiment Index - Top 5 countries

On Wednesday, Feb 18th 2009, African Rainbow Consulting released a new index of African potential investor destinations. The survey organisers says the continent offers good potential growth even against the global economic crisis.

Business consultancy African Rainbow's Star of Africa index ranks 53 African countries in terms of their investment potential in various fields, with its creators arguing that potential growth in energy, water and communications consumption could amply reward investors taking the risk.
"Africa is going to overtake the Middle East to become the second fastest growing region in the world after emerging Asia. It will be affected by the global financial crisis but it is much less exposed than many places."

Best five were: Nigeria, Ethiopia, South Africa, Mauritius and Tanzania.
Least three were : Somalia, Eritrea and Chad.

CORPORATE GOVERNANCE RISKS

• Ethiopia, perhaps a surprise second place given the chronic poverty and hunger within the country and sometimes volatile relations with neighbours, owed its position in the table to its potential for water and electricity service expansion.
  
• Rising oil prices had made Nigeria a favoured investment destination but as the oil price slumped in recent months, the government has imposed capital controls as the currency fell leaving investors concerned that they might not get their money out. Such events were covered under "corporate governance", different investors would have different tolerances for risk and reward.Some investors would view corporate governance as more important than others," she said. "They might be more drawn to somewhere like Tanzania which performs much better against those measures -- which they might not have realised.
  

The index was mainly intended for medium scale investors such as private equity houses making investments larger than those which would be covered by the microcredit sector.

SOME FACTS:

• Approx. 497 million people need access to electricity.
  
• Approx. 47% of Africa's energy use is sourced from biomass, much of which is inefficient and environmentally destructive.
  
• Approx. 600 million potential customers are waiting for access to improved sanitation.
  
• Over 36 million hectares in Africa are suitable for irrigation, but are not actually irrigated.
  
• Approx 628 million Africans do not have mobile telephone subscriptions.
  
• Only 6% of Africans use the Internet.
  

If these are maximised, the result will be improved African living standards and a boost to economic growth.

What is (i) Star of Africa(TM) Index?

The Star of Africa is based on five key indices:

1. Energy Index: calculates the potential market size in each country in terms of megawatt hours.
   
2. Water Index: outlines potential for improving access to sanitation and clean water, weighted by population size.
   
3. ITC Index: maps potential markets for mobile telephone and internet use, PC ownership, factoring in market competitiveness.
   
4. Social Capital Index: yields insight into population's health (40%), education levels (40%) and demographics (20%).
   
5. Governance Index: rescaled aggregate of World Governance Indicators, covering issues such as corruption, violence, rule of law and ease of doing business. 

...while many people in the west would like to contribute to development in Africa without giving aid, there is very little reliable information available to potential investors on where the opportunities lie and the risk involved. The Star of Africa(TM) is designed to address this...

News source: MarketWire and Reuters 

To read more about African Raibow Consulting, click here.