The Democratic Republic of Congo (DRC) and Kenya have been identified as the riskiest investment destinations in East Africa, with factors such as political, social, and economic threats contributing to their high risk scores.
According to the latest edition of the Africa Risk-Reward Index 2024, a country risk ranking by Control Risks and Oxford Economics Africa, Congo has been given a risk score of 7.6 out of 10 for the period ending September 30, 2024. Following closely behind is Kenya with a risk score of 6.06, followed by Uganda (6.01) and Tanzania (5.37). On the other hand, Rwanda stands out as the safest investment destination in the region, with a risk score of 5.11.
The risk scores for each country are assessed on a scale of 1 to 10, with 10 representing the highest level of risk. Similarly, the reward scores are evaluated on the same scale, with 10 indicating the highest level of reward. The reward score takes into account factors such as medium-term economic growth forecasts, economic size, structure, and demographics.
In the case of Kenya, its reward score deteriorated to 5.25 in September 2024 from 5.33 in the previous year, while its risk score also worsened to 6.06 from 5.8. This decline in both scores led to an overall decrease in the risk-reward score by 0.34. Similarly, DRC’s reward score dropped to 5.65 from 5.88, with its risk score deteriorating to 7.6 from 7.53, resulting in an overall decline in the risk-reward score by 0.3.
Kenya recently faced a credit rating downgrade by S&P Global due to the withdrawal of the Finance Bill 2024, which raised concerns about the country’s revenue forecast and rising debt burden. This downgrade marked the third time a rating agency had lowered Kenya’s creditworthiness.
Comparatively, Mauritius emerged as the safest investment destination in Africa with a risk score of 3.22, followed by Botswana (3.44), Namibia (4), and Morocco (4.01). On the other end of the spectrum, Zimbabwe was identified as the riskiest country in Africa, with a risk score of 7.79, followed by Ethiopia (7.7) and Nigeria (7.66).
In Kenya, anti-government sentiment has been on the rise following the anti-Finance Bill 2024 protests in June. The protests led to the withdrawal of the proposed tax law and the inclusion of the opposition in Cabinet appointments by President William Ruto. The government’s tax policies were viewed as a betrayal of Ruto’s promises to improve the lives of ordinary citizens, leading to discontent among the population.
Meanwhile, in DRC, a resurgence of violence in the eastern part of the country has exacerbated the humanitarian crisis, forcing millions to flee their homes to overcrowded camps with limited access to basic necessities. The conflict between the Congolese army and the M23 rebel group has been escalating, further destabilizing the region.
Overall, the investment landscape in East Africa remains challenging, with DRC and Kenya facing significant risks that investors need to consider before venturing into these markets.
