Only six countries in Sub-Saharan Africa are in the top half of the recently released Global Opportunity Index 2015, of which Mauritius is the highest ranked.

The Index, a biennial release by the Milken Institute, shows that the island economy is one of the most open to foreign investment, with the highest Ease of Doing Business score on the continent. Since 2013, Mauritius’ composite score has increased 3.5%, due to improvement in Economic Fundamentals, Rule of Law, and, primarily, Ease of Doing Business.

Overall, in the Sub-Saharan African region, it is Mauritius (31), South Africa (35), Botswana (41), Rwanda (55), Namibia (57), and Zambia (62) that are in the top 50% of the index.

As one of the most improved economies in Sub-Saharan Africa, Rwanda is an interesting case study. Since the horrific genocide of 1994, the Rwandan government has undertaken a series of pro-investment policies and reforms to lure foreign investors. The country ranks an impressive 55 globally, and while FDI per capita is significantly lower than the levels of its East African neighbours, it has increased 10-fold since the early 2000s.

Rwanda increased its composite score by almost 5%, from 5.35 to 5.59, since the last release. For the Eastern African nation, all components of the Global Opportunity Index under the pillar ‘Attracting Foreign Investment’ showed improvement. However, the largest increase was in ‘Regulatory Quality’, already Rwanda’s highest-performing component, as a result of more favourable credit market regulation.

There are still barriers to investment, however, including the explicit and implicit costs of contract enforcement.

Beyond Mauritius and Rwanda, both South Africa and Zambia increased their scores since the last ranking—by 3% and 5.4%, respectively. Composite scores for both Botswana and Namibia declined since the last release — by -4.7% and -7.5%, respectively.

For Botswana, lackluster macroeconomic indicators and a tightening regulatory environment contributed to the deterioration of its total score. Meanwhile, Namibia saw diminished scores for every component. In particular, the cost of contract enforcement almost doubled and there was greater difficulty in challenging regulation within Namibia’s legal framework.

Globally, the index ranks 136 countries on six continents for which data is available for 2015. Sixty-one variables are assessed across four categories related to national economies and supporting infrastructure. Worldwide, it was Singapore, Hong Kong, and Finland that achieved the highest scores on the index that is designed to inform foreign investment decisions. New Zealand, Sweden, Canada, Norway, United Kingdom, Ireland and Malaysia rounded up the top 10, being primarily economically advanced countries with longstanding institutions and traditions of transparency.

The Global Opportunity Index is designed to assist companies and countries as they explore FDI opportunities. It fills gaps in information that frequently discourage mutually beneficial transactions that spur development and job growth.

Moreover, the index provides a baseline assessment for countries seeking to improve their business environments and attract foreign investors, the kind that commit capital to strategic projects rather than move it around as a fleeting portfolio tactic.

Most importantly, the Global Opportunity Index provides companies with much-needed clarity on investment climates in host countries based on a systemic, data-driven scale, thus enabling them to establish inroads to securing strong positions in global commerce. From a country perspective, the index guides policymakers in carrying out reforms to enhance their prospects in the global economy. Many changes can be implemented quickly and at relatively low cost, facilitating strategic transactions that will benefit all parties for years to come.

Finally, the index is the brainchild of the Milken Institute, an independent economic think tank based in Santa Monica, California that publishes research and hosts conferences applying market-based principles and financial innovations to a variety of societal issues in the US and internationally.

(Source: AfricaMoney July 2015)