Namibia's investment risk increases - report
17 September 2020 | Economics
The risk of investing in Namibia has been increasing, while rewards have been declining, according to a new investment report.
The coronavirus pandemic has eroded the overall improvement in risk-reward scores seen across the African continent in recent years.
This is according to the fifth edition of the Africa Risk-Reward Index that was developed by special risk consultancy group Control Risks and independent global advisory NKC African Economics. The index offers a comparative snapshot of market opportunities and risks across the continent. The index shows that Namibia's risk and reward scores have both dropped since last year. Its risk score now stands at 4.21 out of 10, while last year it was 4.44. The country's reward score is now 1.30, while it was 3.73 last year.
According to the report, Africa's recovery after the pandemic may be prolonged and uneven, but it could also be transformative, adding that countries which respond in innovative ways and make structural changes to their economies will recover faster. The report says the coronavirus pandemic could bring positive changes to Africa's economies even if output shrinks as much as 10% in 2020. wThere are already signs that the continent will be disproportionately hit by the outbreak that has raised risk and worsened the investment climate after years of progress, says the report.
“The GDP on the continent is likely to contract 6% to 10% in 2020 with higher debts leading to more frequent financial crises. Dwindling revenues will mean many African countries have less firepower to respond to the pandemic and stoke a quick recovery.”
The report says despite these difficulties and expectations of a long and uneven recovery, foreign investors that are fleeing the continent could be making a mistake.
That is because in some markets the coronavirus has given new impetus to positive reforms, according to the report.
“Substantial changes will both serve the continent's people well and justify a renewed excitement in Africa as an investment destination.”
It said efforts to diversify commodity-dependent economies, deepen domestic financial markets and formalise the labour force could gain momentum in the wake of the pandemic, which forced countries to close borders and lock down cities.
“This recovery will be an opportunity for governments across the continent to address structural constraints and promote new solutions. We are already seeing signs that they are doing so, and for investors this opens up some interesting opportunities,” says Barnaby Fletcher, associate director at Control Risks.