Where to invest in Africa? Resort destinations retain top 3 spots

Morocco has overtaken South Africa in the latest Rand Merchant Bank (RMB) Where to Invest in Africa report, but its authors warn that investors should look beyond the rankings when deciding where to allocate capital.

The report assesses 31 African markets across four pillars: economic performance and potential; market accessibility and innovation; the investment climate; and social and human development.

Read: Morocco tops SA in RMB continental investment ranking

Indicators include population size, urbanisation, economic freedom, inflation, corruption, political stability and income inequality.

RMB compiles the report in response to clients seeking advice on where to invest in Africa, as well as whether to exit particular markets.

“There have been clients that say ‘I want to expand to Africa, but I don’t know where to start’,” says Precious Dube, RMB’s broader Africa macroeconomist.

Policymakers also approach the bank for advice on improving their countries’ rankings, she says.

Morocco moves ahead of SA

Seychelles, Mauritius and Egypt retained the top three positions for the third consecutive year, supported in part by established investment ecosystems and institutional capacity.

Morocco climbed above South Africa into fourth place, benefiting from structural reforms, industrialisation, export diversification, infrastructure investment and macroeconomic stability. Its automotive industry produced one million cars last year.

Read:
Morocco pips South Africa as continent’s top industrial economy
Tourist hotspot Mauritius hit by worst unrest since 1999

South Africa slipped one place, with annual GDP growth of about 1% and high inequality among the challenges weighing on its position.

However, Professor Adrian Saville, whose consultancy Boundless World partnered with RMB on the research, cautions against treating the rankings as a definitive guide to investment decisions.

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“Don’t confuse the ranking with saying therefore we must go to number one, or number one has got no more work to do. There are addressable markets in every single instance,” he says.

The right market depends on the business.

A consumer goods company, for example, may need a much larger population than Mauritius or Seychelles can offer.

Boundless World co-founder Ian Macleod says investors should also consider opportunities that others might overlook.

“I think we can get caught up in looking for positive factors … That’s one way of doing it, but real opportunity tends to lie in solving difficult problems and going places where [your] competitors either don’t want to go or where you can just deal with difficulties better than your competitors.”

Resilience matters

This year’s report introduces a resilience and vulnerability index, reflecting the impact of major shocks, including the 2025 US tariff increases, the Russia-Ukraine war, the ongoing Middle East conflict, higher oil prices and persistent inflation.

Macleod says vulnerability is largely inherited in the short term, but resilience can be developed.

Mauritius and Seychelles rank highly for resilience, while Singapore and Chile offer examples of how countries can strengthen their ability to withstand economic shocks.

Botswana, by contrast, illustrates the risks of relying heavily on a single industry. Its dependence on diamonds has become more challenging as prices have fallen amid competition from lab-grown alternatives, highlighting the need to diversify its economy.

Watch/read: Africa’s biggest challenge isn’t potential, it’s execution

RMB chief economist Isaah Mhlanga says resilience can distinguish otherwise similarly attractive investment destinations.

“Whereas two economies may look equally attractive on a static ranking, the more resilient of the two is, all else equal, the superior destination. More resilient economies will surrender less ground when conditions deteriorate and recover their footing more quickly and from a better position when they improve.”

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Governance reform shifts rankings

Governance and policy reform have also influenced countries’ positions.

Saville points to Nigeria as a notable climber, citing “spectacular structural transformation and reform in the space of 18 months”.

The country has removed fuel subsidies, liberalised its foreign exchange market and introduced broader macroeconomic adjustments. According to the report, these changes are beginning to lay the foundations for more sustainable growth.

Senegal, by contrast, fell sharply in the rankings after concerns emerged over previously undisclosed public debt. Saville said the country had “kept public debt hidden in interesting places”.

Read: Africa needs investors willing to go first

Côte d’Ivoire has made sustained progress, rising from 16th to seventh across the three editions of the report. The country is diversifying beyond cocoa production, developing its oil and gas industry and investing in infrastructure.

What investors look for

For businesses assessing African markets, market size is often the starting point, Dube says, particularly for companies seeking to scale.

“Then policy credibility matters, and currency risks tend to be on top of the list because you want to invest where the currency is stable or at the very least predictable.”

Investors also need to be able to repatriate capital, which remains difficult in several African countries where US dollar shortages persist. A stable governance and regulatory environment, together with adequate infrastructure, is also important.

Lower-ranked markets can nevertheless offer significant opportunities. The Democratic Republic of the Congo and Zimbabwe, for example, offer large markets and mining potential, although operating conditions can be challenging.

Ultimately, Dube says, investors are willing to take on those challenges when the potential returns justify the risks.

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