AFRICA’S foreign direct investment (FDI) inflows have taken a significant hit, plummeting by $10 billion, as escalating geo-political tensions across the globe continue to dampen investor confidence and hinder economic growth on the continent.
The loss is approximately half a percent of Sub-Saharan African region’s annual Gross Domestic Product (GDP) growth.
This was contained in the 2024 edition of the African Country Instability Risk Index report published by SBM Intelligence. It noted that 2024 has been a busy year for sub-Saharan Africa (SSA).
Geopolitical developments, including hostilities in the Middle East and Eastern Europe, had an outsized geopolitical impact on the Sub-Saharan African region, highlighting its international outlook.
“Elections in major countries such as Senegal and South Africa have largely defined the region. Attempted coups in some countries in the Sahel further added to the growing instability, as did climate issues such as floods and drought.”
The report stated that the 2024 SBM Africa Country Instability Risk Index is a follow-up to last year’s report. It added, “The report assesses the political, economic, and social factors contributing to the region’s political instability. It provides a framework for assessing the risk of coups d’état using factors such as ethnic tension, the country’s history of coups, dominant ethnic groups, economic concentration, ageing leaders, and mono-product, bi-product, or multi-product economies.”
The analysis showed that SSA recorded an average of 45.4 percent in 2024, an improvement from 47.7 percent in the previous year. Of 48 countries, 31 reported improved performance, while the rest deteriorated. Angola, Burundi, Chad, Togo, and Madagascar were the biggest gainers. A cutback on governance costs drove Angola’s performance, while Madagascar’s GDP growth improved to 4.4 percent in 2023 from 4.3 percent in 2022. Botswana, Seychelles, Nigeria, Namibia and Zimbabwe were the biggest losers.
Botswana experienced a GDP decline of nearly two percent in the first quarter of 2024, and Zimbabwe experienced economic challenges such as debt and currency crises. Nigeria, Africa’s fourth largest economy, ended the year with a score change of -6, following the exit of foreign businesses over weaker currency, rising inflation and other economic challenges.
On a regional count, Central African countries had the most representation, in the top ten, with about 40 percent of the lot having countries such as Angola, Central African Republic, Chad, and Gabon. Following closely is West Africa at 30 percent with Guinea, Sierra Leone, and Togo.
The regions with the lowest representations are East Africa, with 20% represented by Burundi and Madagascar, and Southern Africa, at 10%, with Eswatini as its sole representative.
It observed that Southern Africa retained its spot as the most stable region for the second year running, with a score change of -1.3. In reverse, Central Africa was the least stable, ending the year with a score change of 6.78, performing worse than East (1.07) and West (2.47).
The ACIRI report breaks down the challenges and opportunities for stakeholders in each region. It offers recommendations on mitigating risks, maximising opportunities, and making informed decisions about investing and operating in Sub-Saharan Africa.
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