South Africa is a middle-income, emerging market with an abundant supply of natural resources; well-developed financial, legal, communications, energy, and transport sectors and a stock exchange that is the 16th largest in the world. Even though the country’s modern infrastructure supports a relatively efficient distribution of goods to major urban centers throughout the region, unstable electricity supplies retard growth. The global financial crisis reduced commodity prices and world demand. GDP fell nearly 2% in 2009 but has recovered since then, albeit slowly with 2014 growth projected at about 2%. Unemployment, poverty, and inequality – among the highest in the world – remain a challenge.
Official unemployment is at nearly 25% of the work force, and runs significantly higher among black youth. Eskom, the state-run power company, has built two new power stations and installed new power demand management programs to improve power grid reliability. Construction delays at two additional plants, however, mean South Africa is operating on a razor thin margin; economists judge that growth cannot exceed 3% until those plants come on line. South Africa’s economic policy has focused on controlling inflation, however, the country has had significant budget deficits that restrict its ability to deal with pressing economic problems. The current government faces growing pressure from special interest groups to use state-owned enterprises to deliver basic services to low-income areas and to increase job growth.
2. Egypt – 23 200 Millionaires
GDP $262 BAs of December 2014
At a Glance
GDP Growth: 1.8%
Trade Balance: -2.3%
Public Debt As % of GDP: 92%
#108 Best Countries for Business
Occupying the northeast corner of the African continent, Egypt is bisected by the highly fertile Nile valley, where most economic activity takes place. Egypt’s economy was highly centralized during the rule of former President Gamal Abdel NASSER but opened up considerably under former Presidents Anwar EL-SADAT and Mohamed Hosni MUBARAK. Cairo from 2004 to 2008 aggressively pursued economic reforms to attract foreign investment and facilitate growth. Poor living conditions combined with limited job opportunities for the average Egyptian contribute to public discontent.
After unrest erupted in January 2011, the Egyptian Government backtracked on economic reforms, drastically increasing social spending to address public dissatisfaction, but political uncertainty at the same time caused economic growth to slow significantly, reducing the government’s revenues. Tourism, manufacturing, and construction were among the hardest hit sectors of the Egyptian economy, pushing up unemployment levels, and economic growth remains slow amid political uncertainty, government transitions, unrest, and cycles of violence. Cairo since 2011 has drawn down foreign exchange reserves and depended on foreign assistance, particularly from Gulf countries, to finance imports and energy products and prevent further devaluation of the Egyptian pound, fearing higher inflation from a weaker currency.
3. Nigeria – 16 000 Millionaires
GDP $502 B As of December 2014
At a Glance
GDP Growth: 6.2%
Trade Balance: 3.2%
Public Debt As % of GDP: 19%
#126 Best Countries for Business
Following an April 2014 statistical “rebasing” exercise, Nigeria has emerged as Africa’s largest economy, with 2013 GDP estimated at US$ 502 billion. Oil has been a dominant source of government revenues since the 1970s. Regulatory constraints and security risks have limited new investment in oil and natural gas, and Nigeria’s oil production contracted in 2012 and 2013. Nevertheless, the Nigerian economy has continued to grow at a rapid 6-8% per annum (pre-rebasing), driven by growth in agriculture, telecommunications, and services, and the medium-term outlook for Nigeria is good, assuming oil output stabilizes and oil prices remain strong. Fiscal authorities pursued countercyclical policies in 2011-2013, significantly reducing the budget deficit. Monetary policy has also been responsive and effective.
Following the 2008-9 global financial crises, the banking sector was effectively recapitalized and regulation enhanced. Despite its strong fundamentals, oil-rich Nigeria has been hobbled by inadequate power supply, lack of infrastructure, delays in the passage of legislative reforms, an inefficient property registration system, restrictive trade policies, an inconsistent regulatory environment, a slow and ineffective judicial system, unreliable dispute resolution mechanisms, insecurity, and pervasive corruption. Economic diversification and strong growth have not translated into a significant decline in poverty levels – over 62% of Nigeria’s 170 million people live in extreme poverty.
President JONATHAN has established an economic team that includes experienced and reputable members and has announced plans to increase transparency, continue to diversify production, and further improve fiscal management. The government is working to develop stronger public-private partnerships for roads, agriculture, and power.
4. Kenya – 8 500 Millionaires
GDP $45 B As of December 2014
At a Glance
GDP Growth: 5.1%
Trade Balance: -9.9%
Public Debt As % of GDP: 54%
#98 Best Countries for Business
Kenya has been hampered by corruption and by reliance upon several primary goods whose prices have remained low. Low infrastructure investment threatens Kenya’s long-term position as the largest East African economy, although the Kenyatta administration has prioritized infrastructure development. International financial lenders and donors remain important to Kenya’s economic growth and development. Unemployment is high at around 40%. The country has chronic budget deficits.
Inflationary pressures and sharp currency depreciation peaked in early 2012 but have since abated following low global food and fuel prices and monetary interventions by the Central Bank. Recent terrorism in Kenya and the surrounding region threatens Kenya’s important tourism industry. Kenya, in conjunction with neighboring Ethiopia and South Sudan, intends to begin construction on a transport corridor and oil pipeline into the port of Lamu in 2014.
5. Tunisia – 6 600 Millionaires
GDP $48 B As of December 2014
At a Glance
GDP Growth: 2.8%
Trade Balance: -9.4%
Public Debt As % of GDP: 51%
#87 Best Countries for Business
Tunisia’s diverse, market-oriented economy has long been cited as a success story in Africa and the Middle East, but it faces an array of challenges during the country’s ongoing political transition. Following an ill-fated experiment with socialist economic policies in the 1960s, Tunisia embarked on a successful strategy focused on bolstering exports, foreign investment, and tourism, all of which havebecome central to the country’s economy. Key exports now include textiles and apparel, food products, petroleum products, chemicals, and phosphates, with about 80% of exports bound for Tunisia’s main economic partner, the European Union.
Tunisia’s liberal strategy, coupled with investments in education and infrastructure, fueled decades of 4-5% annual GDP growth and improving living standards. Former President (1987-2011) Zine el Abidine BEN ALI continued these policies, but as his reign wore on cronyism and corruption stymied economic performance and unemployment rose among the country’s growing ranks of university graduates. These grievances contributed to the January 2011 overthrow of BEN ALI, sending Tunisia’s economy into a tailspin as tourism and investment declined sharply. During 2012 and 2013, the Tunisian Government’s focus on the political transition led to a neglect of the economy that resulted in several downgrades of Tunisia’s credit rating.
As the economy recovers, Tunisia’s government faces challenges reassuring businesses and investors, bringing budget and current account deficits under control, shoring up the country’s financial system, bringing down high unemployment, and reducing economic disparities between the more developed coastal region and the impoverished interior.
6. Angola – 6 400 Millionaires
GDP $124 B As of December 2014
At a Glance
GDP Growth: 5.6%
Trade Balance: 8.6%
Public Debt As % of GDP: 15%
#141 Best Countries for Business
Angola’s high growth rate in recent years was driven by high international prices for its oil. Angola became a member of OPEC in late 2006 and its current assigned a production quota of 1.65 million barrels a day. Oil production and its supporting activities contribute about 85% of GDP. Diamond exports contribute an additional 5%. Subsistence agriculture provides the main livelihood for most of thepeople, but half of the country’s food is still imported. Increased oil production supported growth averaging more than 17% per year from 2004 to 2008. A postwar reconstruction boom and resettlement of displaced persons has led to high rates of growth in construction and agriculture as well.
Much of the country’s infrastructure is still damaged or undeveloped from the 27-year-long civil war. Land mines left from the war still mar the countryside, even though peace was established after the death of rebel leader Jonas Savimbi in February 2002. Since 2005, the government has used billions of dollars in credit lines from China, Brazil, Portugal, Germany, Spain, and the EU to rebuild Angola’s public infrastructure. The global recession that started in 2008 temporarily stalled economic growth. Lower prices for oil and diamonds during the global recession slowed GDP growth to 2.4% in 2009, and many construction projects stopped because Luanda accrued $9 billion in arrears to foreign construction companies when government revenue fell in 2008 and 2009.
Angola abandoned its currency peg in 2009, and in November 2009 signed onto an IMF Stand-By Arrangement loan of $1.4 billion to rebuild international reserves. Consumer inflation declined from 325% in 2000 to about 10% in 2012. Higher oil prices have helped Angola turn a budget deficit of 8.6% of GDP in 2009 into an surplus of 12% of GDP in 2012. Corruption, especially in the extractive sectors, also is a major challenge.
7. Tanzania – 5 700
GDP $32 B As of December 2014
At a Glance
GDP Growth: 7%
Trade Balance: -15.2%
Public Debt As % of GDP: 43%
#116 Best Countries for Business
Tanzania is one of the world’s poorest economies in terms of per capita income, however, it has achieved high overall growth rates based on gold production and tourism. Tanzania has largely completed its transition to a liberalized market economy, though the government retains a presence in sectors such as telecommunications, banking, energy, and mining. The economy depends on agriculture, which accounts for more than one-quarter of GDP, provides 85% of exports, and employs about 80% of the work force.
The World Bank, the IMF, and bilateral donors have provided funds to rehabilitate Tanzania’s aging economic infrastructure, including rail and port infrastructure that are important trade links for inland countries. Recent banking reforms have helped increase private-sector growth and investment, and the government has increased spending on agriculture to 7% of its budget. The financial sector in Tanzania has expanded in recent years and foreign-owned banks account for about 48% of the banking industry’s total assets. Competition among foreign commercial banks has resulted in significant improvements in the efficiency and quality of financial services, though interest rates are still relatively high, reflecting high fraud risk. All land in Tanzania is owned by the government, which can lease land for up to 99 years.
Proposed reforms to allow for land ownership, particularly foreign land ownership, remain unpopular. Continued donor assistance and solid macroeconomic policies supported a positive growth rate, despite the world recession. In 2008, Tanzania received the world’s largest Millennium Challenge Compact grant, worth $698 million, and in December 2012 the Millennium Challenge Corporation selected Tanzania for a second Compact. Dar es Salaam used fiscal stimulus and loosened monetary policy to ease the impact of the global recession. GDP growth in 2009-13 was a respectable 6-7% per year due to high gold prices and increased production.
8. Libya – 5 400 Millionaires
GDP $71 BAs of December 2014
At a Glance
GDP Growth: -5.1%
Trade Balance: 3.8%
Public Debt As % of GDP: 5%
#144 Best Countries for Business
Libya’s economy is structured primarily around the nation’s energy sector, which generates about 95% of export earnings, 80% of GDP, and 99% of government income. Substantial revenue from the energy sector coupled with a small population give Libya one of the highest per capita GDPs in Africa, but Tripoli largely has not used its significant financial resources to develop national infrastructure orthe economy, leaving many citizens poor. In the final five years of QADHAFI’s rule, Libya made some progress on economic reform as part of a broader campaign to reintegrate the country into the international fold.
This effort picked up steam after UN sanctions were lifted in September 2003 and after Libya announced in December 2003 that it would abandon programs to build weapons of mass destruction. The process of lifting US unilateral sanctions began in the spring of 2004; all sanctions were removed by June 2006, helping Libya attract greater foreign direct investment, especially in the energy and banking sectors. Libyan oil and gas licensing rounds drew high international interest, but new rounds are unlikely to be successful until Libya establishes a more permanent government and is able to offer more attractive financial terms on contracts and increase security. Libya faces a long road ahead in liberalizing its primarily socialist economy, but the revolution has unleashed previously restrained entrepreneurial activity and increased the potential for the evolution of a more market-based economy.
The service and construction sectors expanded over the past five years and could become a larger share of GDP if Tripoli prioritizes capital spending on development projects once political and security uncertainty subside. Climatic conditions and poor soils severely limit agricultural output, and Libya imports about 80% of its food. Libya’s primary agricultural water source is the Great Manmade River Project.
9. Morocco – 4 900 Millionaires
GDP $105 B As of December 2014
At a Glance
GDP Growth: 5.1%
Trade Balance: -9.2%
Public Debt As % of GDP: 77%
#79 Best Countries for Business
Morocco has capitalized on its proximity to Europe and relatively low labor costs to build a diverse, open, market-oriented economy. In the 1980s Morocco was a heavily indebted country before pursuing austerity measures and pro-market reforms, overseen by the IMF. Since taking the throne in 1999, King MOHAMMED VI has presided over a stable economy marked by steady growth, low inflation, and gradually falling unemployment, although a poor harvest and economic difficulties in Europe contributed to an economic slowdown in 2012. Industrial development strategies and infrastructure improvements – most visibly illustrated by a new port and free trade zone near Tangier – are improving Morocco’s competitiveness.
Morocco also seeks to expand its renewable energy capacity with a goal of making renewable 40% of electricity output by 2020. Key sectors of the economy include agriculture, tourism, phosphates, textiles, apparel, and subcomponents. To boost exports, Morocco entered into a bilateral Free Trade Agreement with the United States in 2006 and an Advanced Status agreement with the European Union in 2008.
Despite Morocco’s economic progress, the country suffers from high unemployment, poverty, and illiteracy, particularly in rural areas. In 2011 and 2012, high prices on fuel – which is subsidized and almost entirely imported – strained the government’s budget and widened the country’s current account deficit. In the fall of 2013, Morocco capped some of its fuel subsidies in an effort to gradually reduce the country’s large budgetary deficit. Key economic challenges for Morocco include fighting corruption and reforming the education system, the judiciary, and the government’s costly subsidy program.
10. Algeria – 4 100 Millionaires
GDP $216 BAs of December 2014
At a Glance
GDP Growth: 3.1%
Trade Balance: 3.1%
Public Debt As % of GDP: 13%
#137 Best Countries for Business
Algeria’s economy remains dominated by the state, a legacy of the country’s socialist postindependence development model. In recent years the Algerian Government has halted the privatization of state-owned industries and imposed restrictions on imports and foreign involvement in its economy. Hydrocarbons have long been the backbone of the economy, accounting for roughly 60% of budget revenues, 30% of GDP, and over 95% of export earnings. Algeria has the 10th-largest reserves of natural gas in the world and is the sixth-largest gas exporter.
It ranks 16th in oil reserves. Strong revenues from hydrocarbon exports have brought Algeria relative macroeconomic stability, with foreign currency reserves approaching $200 billion and a large budget stabilization fund available for tapping. In addition, Algeria’s external debt is extremely low at about 2% of GDP. However, Algeria has struggled to develop non-hydrocarbon industries because of heavy regulation and an emphasis on state-driven growth. The government’s efforts have done little to reduce high youth unemployment rates or to address housing shortages.
A wave of economic protests in February and March 2011 prompted the Algerian Government to offer more than $23 billion in public grants and retroactive salary and benefit increases, moves which continue to weigh on public finances. Long-term economic challenges include diversifying the economy away from its reliance on hydrocarbon exports, bolstering the private sector, attracting foreign investment, and providing adequate jobs for younger Algerians.