Botswana leads the Africa Investment Index
Botswana has emerged as the best short-to-medium-term investment destination in Africa according to Quantum Global Research Lab’s Africa Investment Index (AII) for 2016, released last month. In the previous article, we looked at the factors considered for creating the index, top 10 countries ranked according to this index, and key observations from Quantum’s analysis.
The rankings, based on six factors, show Botswana made it to the top because of good scores on credit ratings, current account ratio, ease of doing business, and import cover. The country also ranked fairly high on excess money supply, real interest rate, and Facebook penetration rate. On the other hand, it did quite poorly on economic growth where it ranked 50th out of 54 nations.
In 2015, Botswana had stood fifth overall in the rankings, and was placed third in 2014.
Diamonds to weigh on the economy?
Diamond exports dominate the economy of Botswana, forming 80% of all exports and 33% of gross domestic product (GDP). Recently, ratings-major S&P Global, which rates the country at ‘A-‘, affirmed its negative outlook on the country because of this over-reliance on diamond exports.
The country witnessed an improvement in its fiscal deficit in the fourth quarter of the year ended March. This was duet to heightened demand for rough diamonds which helped Debswana – the joint mining venture between the government and De Beers – sell off its inventory.
S&P Global is concerned about lower production at Debswana and lower diamond prices. While production declined from 23 million carats in 2014 to 20.5 million carats in 2016, prices declined 15% on the year.
Macro-economically, Botswana in still not among the new resilient seven countries in sub-Saharan Africa according to the World Bank’s Africa’s Pulse report.
However, its exceptional ranking on four of the five risk factors combined with the ease of doing business, where it ranks 71st among 190 countries according to the World Bank’s Doing Business report makes it an attractive investment option. Interestingly, Botswana ranks higher than South Africa in the Doing Business index.
In the next article, let’s look at the other two countries in the top three: Morocco and Egypt.