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Nigeria is investment friendly, says survey

Nigeria and Ethiopia have been named the most attractive countries for potential investors African Rainbow business consultancy in a survey says the two countries offers good potential growth even against the global economic crisis.

New business consultancy African Rainbow’s S tar of Africa index
ranks 53 African countries in terms of their investment potential in various fields, with its creators arguing that potential growth in energy, water and communications consumption could amply reward investors taking the risk.

Speaking in London on Friday (February 27), Katharine Pulvermacher,
chief executive of African Rainbow, warned investors not to assume all of the economic growth in Africa occurred in a small handful of countries such as South Africa, or oil-rich Nigeria.

“Actually when you start to look at the IMF forecasts for growth
what emerges is quite a different story. So Africa is expected to be the
third fastest growing region in 2009 and the second fastest in 2010 – amongst the few regions which is expected to have positive economic growth even after the financial crisis has been taken into account, she said.

She added that “there are good reasons for that because, as a
continent, it’s actually got a very diverse product structure that really
simply has not been taped into.”

Nigeria and Ethiopia topped African Rainbow’s index of African
potential investor destinations. South Africa, Mauritius and Tanzania took third, fourth and fifth place respectively, Pulvermacher said.

But the survey made clear that some countries still have a long way to
go, with Somalia, Chad and Eritrea named the least appealing markets on the African continent, particularly due to low ratings for corporate governance and social capital.

Nigeria’s potential for infrastructure expansion in electricity,
water, information technology and communications as well as its status as Africa’s most populous country propelled it to the top of the list.

Ethiopia, perhaps a surprise second place given the chronic poverty and
hunger within the country and sometimes volatile relations with neighbours, owed its position in the table to its potential for water and electricity service expansion.

“The reason that Nigeria and Ethiopia come out top is very
straightforward. They come out top on the aggregate index because the opportunity sets in the sectorial index are population-weighted and Nigeria has a population of 148 million and Ethiopia has a population of 83 million, and given that access to electricity and water and even internet in those two countries is not that great, there clearly is an opportunity, obviously mitigating that you have to weigh up the constraints of social capital that might require investment and considerations about governance,” Pulvermacher explained.

Rising oil prices had made Nigeria a favoured investment destination
but as the oil price slumped in recent months, the government has imposed capital controls as the currency fell leaving investors concerned that they might not get their money out. Pulvermacher said such events were covered under “corporate governance” and that different investors would have different tolerances for risk and reward.

Despite the global financial crisis and falling commodity prices the
investment opportunities are there in a continent where some 497 million Africans have yet to connect to electricity grid, and only 6 percent of Africans used the Internet.

“Where there are countries that allow for private and public
partnership, where they allow, in the electricity sector or the telephone
sector, for example, for independent service providers, there is actually
great scope to get involved and create both jobs and good returns on
investment and at the same time do good – because those three sectors – getting them off the ground is really key to poverty alleviation,” Pulvermacher said.

Pulvermacher was referring to the three sectors of electricity, water
and IT communications, which, along with the social capital index and
corporate governance index, make up the African Rainbow’s Star of Africa index which was published on February 18