The 3 biggest problems doing business in Africa, according to an economist

At the International Federation of Freight Forwarders Associations (FIATA) conference in Cape Town RMB’s economist, Celeste Fauconnier pointed out that the 3 biggest hurdles hampering business in Africa are liquidity, infrastructure and corruption. Readers of this Newsletter will recall that it is estimated that Africa needs infrastructure investment of between $130bn (R1.9trn) and $170bn (R2.4trn) per year – up from an estimated $90bn (R1.3trn) per year a few years ago. As a region, East Africa is expected to be the main growth driver on the Continent for the next decade, according to Fauconnier. Apart from the recent discovery of oil and gas, it is also benefiting from regional economic and trade integration thanks to the East Africa Community (EAC). Ethiopia made it onto the top 10 list of African countries to invest in, mainly because it is starting to open its borders to international investors and is one of the fastest-growing economies on the Continent and in the world. Rwanda is among the top 5 easiest countries to do business in Africa. A new business can be opened online within 24 hours. It also offers access to the EAC and became the African hub for Alibaba. Meanwhile, Tanzania has lost its place among the top 10 countries thanks mainly to government interventions.

As for countries in the COMESA region (19 countries stretching from SA to Egypt and including the 6 EAC countries), the picture is not so rosy. In Zambia, government debt levels have increased significantly and the mining sector is starting to feel the effect. Mozambique is struggling at the moment, but due to strong coal supplies and the discovery of oil and gas, its economy is expected to be boosted again in future. Three of the easiest economies to invest in on the Continent are Mauritius, Botswana and Namibia. All 3 have better sovereign ratings than SA. As for foreign direct investment (FDI), SA is still a large recipient, but in dollar terms, it is not in the top-10 list in Africa anymore. Most FDI projects come from the US, UK and France, but in dollar terms, China is the biggest source. China is investing not just in resources but also in infrastructure, farming and manufacturing.