Morocco displaces Botswana to become Africa’s most attractive investment destination in 2018

Morocco has been named the most attractive investment destination in Africa for 2018, displacing Botswana which came first in the last edition of Africa Investment Index (AII).

Followed closely by Egypt and Algeria, “Morocco has been consistent in attracting an inward flow of foreign capital, specifically in banking, tourism and energy sectors and through the development of industry,” Prof. Mthuli Ncube, Managing Director, Quantum Global Research Lab said in a press statement.

According to  Africa Investment Index (AII) 2018 released by Quantum Global’s independent research arm, Quantum Global Research Lab., the North African country ranks first based on its increasing solid economic growth, strategic geographic positioning, increased foreign direct investment, external debt levels, social capital factors and overall favorable business environment.

A recent data by the Moroccan Exchange Control also revealed that the country attracted nearly $2.57 billion of Foreign Direct Investment (FDI) in 2017, up from 12 percent compared to 2016.

The country is being recognized as one of the best-emerging markets for overseas investment. International investors are also looking at wide range of sectors for investments including areas such as energy, infrastructure, tourism, and ICT amongst others.

The AII report further revealed that the top five African investment destinations attracted an overall FDI of $12.8 bn in 2016. Cote d’Ivoire ranks 5th while being the fastest growing economy in Africa and scores relatively well in liquidity and risk factors such as real interest rate, exchange rate risk and current account ratio. The improved risk profile, combined with strong liquidity, business environment, demographics and social capital record has raised Algeria to 3rd position on the index.

Botswana, which previously ranked as Africa’s top investment destination ranks 4th by scoring well in risk factors as well as the business environment. Countries such as Swaziland, Angola, Rwanda, Chad, Comoros, Seychelles, South Sudan and Sierra Leone recorded strong improvements over the last three years.

“Continued FDI inflows will continue to drive the much-needed capital to develop Africa’s primary sectors to meet the demands of the continent’s rapidly growing middle-class, and into manufacturing sectors to create more jobs, enhance economic growth and support structural transformation,” Prof. Ncube said further.

How the Index was calculated

The Africa Investment Index (AII) is constructed from macroeconomic and financial indicators and the World Bank Group’s Ease of Doing Business Indicators (DBI). The DBI ranks countries in terms of a regulatory environment conducive to business operation.

AII focuses on five pillars or factors from a wider range of investment indicators, which include the share of domestic investment in the gross domestic product (GDP), the share of Africa’s total Foreign direct investment (FDI) net inflow, GDP growth rate forecast, inflation differential, credit rating, import cover, the share of the country’s external debt in its GNI, current account ratio, ease of doing business and the country’s population size. The AII indicators are based on secondary data collected from World Bank Development Indicators, the International Monetary Fund (IMF) World Economic Outlook, the United Nations Conference on Trade and Development (UNCTAD) Data Centre and own estimates.

AII is a combination of individual indicator’s rank into a single numerical ranking. It averages the country’s macroeconomic and financial indicators rankings on the five different factors. Each indicator and factors receives an equal weight. Their rank score is then averaged to produce the total average score, which is consequently ranked from 1 to 54. The higher the value of the ranking, the lower the implied business investment climate.

To produce an index score that captures medium-term changing aspects, individual country’s ranking is scaled relative to a benchmark or reference value (i.e., the past three-year rolling average ranking). In addition to the intended measurement, this approach helped to avoid periods of structural changes (which may compromise the index) that may be present in a longer time span, whether we consider a change from a reference average value or a historical reference period.