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. This creates an opportunity from an investment perspective as it provides an apparent demand for a diverse array of products and services. 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 the high-income earners of the population. This creates an investment risk, as the depth of demand for products and services may be concentrated in a small sector of the population.
The Maghreb region and Egypt and Sudan regions have large GDPs per capita, and the lowest Gini coefficients in Africa. The combination of these two factors makes these regions attractive for business and investment activity as it indicates a broader base of consumers.
Southern Africa and East Africa both have a Gini coefficient higher than the global median and GDP per capita below the African median.
The modified calculation of the Gini coefficient considers income and free services received because of income and wealth redistribution policies established by the government. Consequently, we have found the modified Gini coefficient to show lower levels of inequality for countries that have established redistribution policies. Thus, the modified Gini coefficient for South Africa would be materially lower than the traditional Gini coefficient, because of the government’s established redistribution policies. We have not used the modified Gini coefficient in our analysis, as it would make comparability difficult from country to country as many African countries do not have established redistribution policies. Furthermore, the modified Gini coefficient is not commonly used and published.