2019


Ghana among top 10 investment destinations in Africa in 2019

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14th March 2019

The Ghanaian market remains one of the top ten attractive investment destinations on the African continent, even after the worst banking crisis in its history, according to Rand Merchant Bank Ltd. (RMB), the Corporate and Investment Banking division of FirstRand Limited.

For the South African entity, growth will be driven mainly by the hydrocarbons sector with a continuous increase in oil and gas production.

In its latest annual 'Where to invest in Africa' study, Johannesburg-based RMB stated that "Ghana has solid growth rates centred on the hydrocarbon sector, while the progression of the non-oil industry is supported by pro-business reforms".

However, the country has dropped from fifth to ninth place in the 2019 ranking as a result of the International Monetary Fund's (IMF) downward revision of its last year's growth rate and the reforms needed to correct weaknesses in its banking sector, according to RMB analysts and study co-authors Celeste Fauconnier and Neville Mandimika.

"Competitive economies have shown greater improvements in both the economic and operating environment indices," the experts stress. "Structural strength could help Ghana reach its growth forecast for 2019.

In this context, gathers the news portal GhanaWeb, the Ministry of Finance forecasts an economic expansion rate of 7.6% for this year. In April 2018, the agency chaired by Christine Lagarde reduced the 2018 outlook from an estimated 8.9% in October 2017 to 6.3%. The national statistics agency will publish figures for the fourth quarter and provisional annual data on 17 April.

The eighth edition of the 'Where to invest in Africa' report emphasizes that efficient infrastructure is critical to uncovering opportunities and unlocking Africa's growth potential. According to the World Bank, the lack of efficient infrastructure reduces the continent's average per capita growth rate to 2.6% and puts significant pressure on human development.

The most recent estimate of the African Development Bank's (AfDB) infrastructure needs is between 130 billion and 170 billion dollars (in the range between 114 960 and 150 330 million euros) per year; however, "the available capital is insufficient to achieve this," says Fauconnier. This deficit presents an opportunity for companies involved in the development or financing of infrastructure projects.

In assessing Africa's most attractive investment sectors, RMB again considered two important conditions for viable investment: economic activity and the operating environment.

While there were changes in this year's ranking, the top three countries last year - Egypt, South Africa and Morocco - have maintained their positions in terms of investment attractiveness.

The analysis of the report on African nations reveals that 11 places will grow above 6%. Ethiopia is expected to be the fastest-growing economy, averaging 8.2% over the next six years.

Certain sectors offer opportunities for long-term growth prospects. Natural resources will continue to play a major role in attracting funds, particularly hydrocarbons and base and precious metals.

"The agricultural sector will become a more attractive investment target as world food processing (...) and demand increases," says Mandimika. "Significant demographic change, especially the sharp increase in population, urbanization and GDP per capita, also offers prospects for growth.

RMB also identifies other growth opportunities. From a fiscal perspective, Africa has low levels of revenue collection; and the IMF estimates that sub-Saharan Africa could collect between 3 % and 5 % of the additional Gross Domestic Product in fiscal revenue if it improves collection systems and expands the tax network.

These challenges need time to be resolved, as there has been no real progress in the overall operating environments. Victor Yaw Asante, head of Corporate, Commercial and Investment Banking at First National Bank Ghana, the local unit of RMB, believes that lack of access to finance, corruption, weak government and inadequate and inefficient infrastructure remain fundamental problems for doing business in Africa.

"In Ghana, for example, private sector investment is low, but it could change through more business environment reforms, greater infrastructure, and a more efficient business environment.

 

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