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Nairobi ranked third most attractive city to investors in Africa

By James Anyanzwa | October 11th 2014

Kenya: Kenya ranks amongst three nations perceived to be the most attractive investment destinations in Sub-Saharan Africa, a new study shows.

The other countries according to the survey by global consultancy firm Ernst & Young include South Africa and Nigeria. These countries account for over 40 per cent of the total foreign direct investment (FDI) projects in the continent, according to the survey whose findings were released yesterday. Angola, which is the fourth-largest recipient of FDI projects is similarly perceived to be the fourth-most attractive investment destination.

“However, investors who are not yet established in Africa are less aware of opportunities in countries other than South Africa,” the report says.

According to the report, Africa’s cities are now emerging as the hotspots of economic and investment activity on the continent. “Transport corridors and trade routes are being developed to connect these cities, transforming them into sizeable urban clusters, large enough for consumer-facing companies to target,” says report.

The report says nearly 70 per cent of the respondents to the survey stressed the significance of cities and urban centres in their investment strategy in Africa. In terms of perception, city attractiveness closely mapped country appeal with half of the respondents quoting South African city as their first option.

According to the report dubbed ‘2014 Africa Attractiveness’, Johannesburg is considered the most attractive city in which to do business ahead of Cape Town. Nairobi and Lagos are ranked as the third and fourth most attractive cities respectively. In North Africa, Casablanca, Cairo and Tunis are perceived as the top three cities in which to do business.

Middle class

“Our investors also highlighted that in order to attract greater investments, cities need to focus on the following critical factors: infrastructure (77 per cent), consumer base (73 per cent), local labour cost and productivity (73 per cent) and a skilled workforce (73 per cent),” says report.

According to the survey, Africa’s perceived attractiveness relative to other regions has improved over the past few years. Africa has moved from the third position in 2011 to become the second-most attractive investment destination in the world. This year, only North America ranks ahead of Africa in terms of investment attractiveness.

“The dominant view is that change is real. Economic growth and development will continue, and will be driven by a burgeoning African middle class with growing levels of discretionary income, growth in local entrepreneurship and investment in bridging the infrastructure gap,” says.

Gitahi Gachahi, EY’s Chief Executive in-charge of the East African region. According to the report, 60 per cent of the respondents said there had been an improvement in Africa’s investment attractiveness over the past year up four percentage points from the 2013 survey.

Similarly, nearly three out of four respondents believe that Africa’s attractiveness will improve further over the next three years. According to the survey, Africa’s share of global FDI flows has been improving year on year. In 2013, Africa’s share of global FDI projects reached 5.7 per cent, its highest level in a decade.

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