Serious concerns in risk score
Control Risk Consultancy, a consulting firm headquartered in London, England, in consortium with the Oxford Economics, has placed Ethiopia at the top of the chart in Africa Risk-Reward Index, which ranks countries depending on the risks and rewards for investors there.
According to the report released this week, Ethiopia has scored 8 out of 10 in the rewards score while its risk score value stands at 5.5.
“The Africa Risk-Reward Index plots each country’s performance relative to African peers and highlights how some of Africa’s largest economies are outshone by smaller rivals,” the report explains, adding, “some countries this year slid off the ranking while others like Namibia improved their placing despite difficulties.”
The report advises investors to seriously consider some major points when it comes to designing or revising business strategies in Africa. The first advice is, “Do not get carried away by the enthusiastic reform promises by assuming that reform-minded strong-man leaders can push their way through free of any constraints.” The second goes as “Have a closer look at the potential opportunities brought by closer intra-Africa cooperation.” And finally “keep an eye on how increasing multi-polar geopolitical competition across the continent is shaping domestic political dynamics and the business landscape.”
This year’s report highlights Ethiopia’s liberalizing move spearheaded by PM Abiy Ahmed (PhD) in sectors like telecommunications.
“The promise of access to a market of more than 100 million has allowed Ethiopia to maintain a very high reward score. However, this reward score has shown no improvement from the last edition, while Ethiopia’s risk score remains stubbornly high. The timetable for telecommunications liberalization has already slipped, foreign exchange shortages persist, and the postponement of [census] shows the difficulties in pushing through political reforms,” the report maintains.
Hence, the case in Ethiopia, coupled with that of Angola, should be alessons for investors that reformist administrations have limitations, indicates the report, as structural problems take time to address. It also indicates that civil servants used to the old ways of “state-led development models lack the experience and expertise to deliver structuring and liberalization,” especially when it comes to tight delivery schedules.
“In both countries, the grand plans and popularity of reformist leaders have lost momentum as they come up against complex party structures,” opines the report, adding that, “amid Abiy mania, it was easy to forget that Abiy does not have a popular mandate, having been selected by the ruling Ethiopian Peoples’ Revolutionary Democratic Front (EPRDF) coalition.”
While the report ranks African countries based on their suitability for investment, it provides straight forward and multiple pieces of advice to investors, including, but not limited to, “The award of new telecommunications licenses in Ethiopia will offer genuine opportunities for foreign investors who understand that their bids will be judged not only by planned investment and technical capability but also by how closely their plans support broader development goals.”