Johannesburg, the economic heartland of South Africa, has long served as the home for foreign investors who, while interested in the financial pay-offs of investing in Africa’s underserved sectors, lack the appetite to operate in larger yet more politically risky countries elsewhere on the continent. Drawn to the city’s integrated infrastructure, as well as its sophisticated industries replete with a highly educated workforce and a large stock exchange, foreign firms wishing to develop a presence across Africa have historically used Johannesburg a gateway to the continent.

Hosting listed companies including UK-based bank Barclays and French financial services firm BNP Paribas, the Johannesburg Stock Exchange (JSE) is well established as Africa’s foremost financial services centre. “When you consider Africa, Johannesburg has played a leading role in international financial services rankings such as our Global Financial Centres Index [GFCI], and this is because South Africa is one of Africa’s biggest economies,” says Mark Yeandle, an associate director at consultancy Z/Yen. “It has a well-developed financial centre and it hosts all the big banks’ branches.”

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While African countries such Mozambique, Zambia and Guinea were marked out by the International Monetary Fund as being among the world's top 15 fastest growing countries, a challenge often cited by foreign firms doing business in Africa is that there remains a dearth of sophisticated financial services that meet their financing needs. As a result, South Africa’s advanced financial services industry has thrived because of its ability to meet the borrowing and lending needs of foreign investors, and the JSE has established a firm lead as Africa’s largest stock exchange and the 18th largest globally.

Casablanca: northern star

Yet as the political climate across a host of African countries has improved over the past decade, consistent economic growth has created several nascent yet growing financial services hubs elsewhere across the continent. Pointing to the development of Casablanca Finance City (CFC), Mr Yeandle says that the Moroccan government’s efforts in creating supportive infrastructure to attract investors interested in economic opportunities in north Africa has led Casablanca to feature among the GFCI’s top 100 leading international financial centres for the first time, in 62nd place.

“Casablanca is a city that is up and coming and the government has spent a lot of money on reputation management,” says Mr Yeandle. “It is also actively employing people to go out and encourage FDI, and it is very careful about managing its regulatory environment.”

The Moroccan government’s move in 2010 to create the CFC has not only positioned the country as a regional financial centre for inward FDI from Europe, but it has made it a strategic entry point for businesses interested in investing in northern and francophone Africa. Located at the heart of Casablanca’s new city centre, Casablanca-Anfa, the CFC was designed as a business village for large African and international companies that wish to establish a representative office in north Africa.

While the CFC will primarily serve financial services firms, it will also invest in offering other professional services to investors. In addition, the government has made significant efforts to market the CFC as a headquarters location for prospective investors through offering companies a legal 'CFC status' as an incentive to establish their primary office in the city. Businesses that qualify for this status will receive tax exemptions, and the CFC will reduce a firm’s currency exchange charges when it completes foreign transactions.

For its efforts, the CFC has experienced some success in attracting international business, including United Arab Emirates-based asset manager Invest AD, BNP Paribas’ regional investment company and US-based global insurance firm AIG. “While this is the first time that we have included Casablanca on the GFCI, the people we surveyed maintained that although it may not be [perfect] yet, it is up and coming and it is a key centre to watch in Africa over the next two years,” says Mr Yeandle.

Nigeria's island home

Even if Nigeria remains notorious as one of the most difficult countries in sub-Saharan Africa to do business in – the country fell by nine places to 147th in the World Bank’s 2014 Doing Business rankings – its government has made significant efforts to tackle its onerous operating environment.

Keen to capitalise on its recent success in overtaking South Africa and becoming Africa’s largest economy – the Nigerian government’s National Bureau of Statistics estimates that Nigeria’s GDP is now worth $488bn – efforts have been made to position Lagos as west Africa’s financial services hub. While Lagos serves as Nigeria’s business capital, the city’s infrastructure has largely struggled to keep up with its population growth. According to think tank City Mayors Foundation, Lagos – which is home to more than 21 million people – is the fourth largest city in the world in terms of its population density.

Thus the government’s decision to embark in an extensive process of land reclamation along the Atlantic Ocean is expected to extend the city’s infrastructure capacity by 2016 through creating a financial and business services centre. Named the Eko Atlantic City, the new island will be located just off the coast of Lagos and it will host seven specialised districts for local and international businesses. Offering firms the infrastructure to cater to sectors including financial services, real estate and tourism, the island’s business district will offer financial services companies access to customised mixed-use properties. Moreover, transport facilities will remain highly integrated to mainland Lagos in order to promote efficient travel between the two locations.

Although the first phase of this development will be completed in 2016, the government remains confident that Eko Atlantic City will be a game-changer for the country’s financial services industry. “Building a new city that will become the financial centre of Nigeria, if not west Africa, is a major undertaking. This exciting development combines cosmopolitan living with landscaped open spaces, and investment interest is strong," it said in a statement.

Up-and-coming Rwanda

Although Rwanda is one of Africa’s smallest countries, its government’s proactive efforts to reform its financial services institutions, as well as encourage regional intra-east African co-operation with neighbouring countries such as Kenya and Uganda, has led the country to emerge as an alternative investment destination for financial services firms.

Although the country is home to just 12 million people, Hubert Ruzibiza, the head of services development at the Rwanda Development Board, says that the government has experienced significant success in reforming its regulatory institutions to match neighbouring countries in order to market Rwanda as an additional investment destination for firms already operating in the likes of Kenya and places further afield such as Mauritius.

“We are working on developing our regulatory structures, and tackling issues such as double taxation,” says Mr Ruzibiza. “We have signed the investment promotion protection agreement with countries such as Mauritius so we have made positive changes.”

Although just 42% of Rwanda’s population has access to formal financial services, Mr Ruzibiza maintains that this presents a significant opportunity for financial services firms that are struggling to grow in saturated markets elsewhere on the continent. He also maintains that the government’s efforts to encourage companies to engage in dual listings through listing their secondary operations on the Rwanda Stock Exchange, will position Rwanda as the next frontier for growth in east Africa.

“Our stock exchange is little and very young – it only started in 2011,” says Mr Ruzibiza. “Yet we have conducted three initial public offerings, all of which were oversubscribed. We want to encourage more companies to cross-list, and we are very confident that we will successfully attract more listings.”

Reputational damage

Africa’s recent economic performance has been promising, and data from greenfield investment monitor fDi Markets shows that between 2003 and 2014, the financial services industry attracted the most amount of greenfield projects into the continent. Yet inward FDI still remains clustered around South Africa. While several markets across Africa lack the economies of scale to be attractive to large financial services firms, bouts of political upheaval in previously stable investment destinations such as Egypt continue to dent investor confidence when it comes to operating elsewhere in Africa.

“People want to see that a country is politically stable – they would not want to invest in a country where they could be removed at any moment,” says Mr Yeandle. “Political stability is not necessarily a problem in many African countries, however it remains a reputational challenge. The problem with Cairo, for example, is that over the past two to three years it has experienced considerable reputational damage.”

Moreover, while governments have made attempts to create financial districts with focused and tailored infrastructure to meet investors’ needs, professional services firm Accenture reports that such attempts remain fragmented, and more efforts need to be made in encouraging regional co-operation across a cluster of countries in order to offer businesses greater economies of scale.