Investment in Africa

How Africa’s regions compare

While investor interest is reinforced for high growth-rate regions like Maghreb, East Africa, Ghana and Francophone West Africa, there are low growth-rate concerns for Nigeria, South Africa, Southern Africa (ex SA) and Central Africa.

Relative wealth of regions

 

South Africa has the greatest wealth per individual on the continent (using GDP per capita as a proxy). However, the country also has the highest Gini coefficient than all the other regions in Africa. This contrast provides both opportunities and heightened risks for investment activity.

A high GDP per capita suggests a high living standard for the general population. This creates an opportunity from an investment perspective as it provides a conducive demand environment for a diverse array of business activities. However, a high Gini coefficient indicates a large degree of income inequality within the population, suggesting that the wealth of the country is concentrated amongst a limited number of high-income earners in the population. This creates an investment risk, as the income elasticity of demand becomes a greater consideration when engaging in business activity; as there may be less demand by the general population.

The Maghreb and Egypt and Sudan regions have large GDP per capita, and the lowest Gini coefficient in Africa

The Maghreb and Egypt & Sudan regions have large GDP per capita, and the lowest Gini coefficient in Africa. The combination of these two factors makes these regions comparatively attractive for investment as it indicates a larger consumer bracket.

Southern Africa and East Africa both have a Gini coefficient higher than the global median and GDP per capita below the African median. The high levels of inequality, coupled with the relatively low levels of wealth, highlights the need for inclusive growth, to both create investable depth in an economy and social and political stability.

The modified Gini coefficient considers income and free services received because of wealth redistribution policies established by the government. As South Africa is the only African country with substantial redistribution policies in place, the use of this metric would result in a lower Gini coefficient for South Africa. The modified calculation, however is not widely published and as such, comparable data is not available continent-wide.