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Africa’s rising stars: The countries to watch in sub-Saharan Africa

In a series of quick-fire questions, Euromoney’s rising stars were asked which African countries they believed to have the most untapped potential. Here they discuss the ones on course to thrive – if those countries can get their act together.

Mozambique, the Democratic Republic of Congo (DRC) and Zimbabwe have some of the most untapped potential in sub-Saharan Africa (SSA), according to Euromoney’s Africa’s rising stars.

An abundance of natural resources, a young work force and high growth from a low base has put these countries in a strong position to thrive within the next five to 10 years.

Ayanda Sisulu-Dunstan 
Ayanda Sisulu-Dunstan 

“Mozambique is the fastest-growing African economy, forecast by the IMF to grow at an average rate of about 8% from 2013-2018, and will present a number of investment opportunities for both domestic and offshore investors,” says Ayanda Sisulu-Dunstan, co-head of debt capital markets, Rand Merchant Bank.

Joshua Siaw, director of Africa practice at law firm White & Case, adds: “Mozambique is at the primary stage of gas exploration and has already found the largest gas reserve anywhere in the world over the last decade.”

KPMG’s country mining guide for Mozambique predicts that by 2017 the value of the country’s mining sector will reach $735 million. Total output of coal will top 41.8 million tonnes, says KPMG, making the country the largest coal exporter globally.

In the DRC and Zimbabwe, an abundance of coveted minerals accounts for their potential. The DRC is renowned for cobalt, copper, gold, silver, zinc, manganese and uranium, while Zimbabwe boasts more than 40 types of valuable minerals, including large deposits of diamonds and platinum.

However, realizing this potential has been undermined as political instability and legacies of war continue to plague these countries. Mineral, oil and gas wealth has worked to prolong conflict, while these countries also remain highly dependent on international aid despite their natural riches.

Doing business in these countries also remains difficult. In the World Bank’s 'ease of doing business' report 2014, Mozambique ranked 139, Zimbabwe 170 and the DRC 183 out of 189 listed countries.

“Mozambique’s potential lies in natural resources, but conflict in the past has hindered development – hence the untapped potential,” says Martin Ganda, CEO of Tamuka Group.

Kobby Bentsi-Enchill, head of debt capital markets for West Africa, Stanbic IBTC Bank, adds: “While the DRC has vast mineral resources, it has a dearth of political, social and physical infrastructure to tap into its potential and engender economic growth and market development.”

According to Tamuka's Ganda: “Zimbabwe has tremendous growth potential given its natural resources, educated and skilled human capital. But the investment climate has not been conducive to foreign investors given the high taxes, high cost of power and perceived high risk.”

Countries such as Ghana and Nigeria have made constructive changes in their search for political stability and are much more likely to tap into their potential.

“Nigeria has a large and very young population, several untapped mineral deposits, the entrepreneurial drive, growing capital markets and increasing political stability,” says Yinka Odeleye, director, head of corporate finance, Citi, Nigeria.

Patience Akyianu, Barclays 
Patience Akyianu 

Patience Akyianu, managing director, Barclays Bank, Ghana, adds: “Nigeria has long been labelled the powerhouse that should drive sub-Saharan African economic development, and has oil wealth, a large population and resources to become one of the largest, most significant economies not just in the region but in the world. This is caveated by its obvious political and governance issues."

In a blow to Nigeria’s economic and financial development, Central Bank governor Lamido Sanusi was suspended from his position earlier this year. And the kidnapping of more than 200 girls by Islamist militant group Boko Haram in northeastern Nigeria has done little to eradicate lingering concerns around the country’s safety and security.

Ghana is seen differently, according to Sangu Delle, CEO of Golden Palm Investments.

“Ghana has the political climate, institutions, labour force and natural resources where with effective transformational leadership can truly set the gold standard on the continent as far as development,” says Delle.

Barclays' Akyianu adds: “Political stability is directly related to governance and the rule of law, and that is paramount for sound commercial and contractual development which is foundational to financial improvement.

“This is one of the reasons politically stable sub-Saharan African countries attract more foreign direct investment flows because people trust the legal system, governing bodies and institutions in destination countries. Ghana, for instance, has the most stable environment and if it can overcome its currency and fiscal issues it is a prime location for investment and a service hub for western Africa.”

The hope is that Ghana can overcome such issues, and that its true potential can be realized, according to Jo-Ann Pohl, CFO for Standard Chartered in South Africa.

“Ghana is in the running for the country with the most untapped potential – most especially once they have managed to overcome their current debt challenges," she says. "Ghana has important long-term, real economy strengths.”

However, realizing this potential is not going to be easy. Since the re-denomination of the cedi in 2007, Ghana’s currency has been in free fall and interest-rate hikes and strict foreign-exchange regulation changes have done little to stem the issues. The cedi has dropped 18% against the dollar so far this year, making it the worst-performing currency in SSA.

Ghana’s fiscal deficit stands at 12% of GDP.

And yet Pohl argues that despite sporadic instances of instability, Ghana’s financial development has not been derailed completely, but rather delayed to different extents in various places. 

“We should acknowledge that policymaking in Africa has improved over the past decade, and in some cases dramatically so," she says. "For example, in achieving macroeconomic stability, on average Africa has achieved single-digit inflation figures over the past five years according to the IMF." 

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