WHILE South Africa remains the most attractive corporate investment destination in Africa, Nigeria is nipping at its heels and may overtake it as soon as next year, according to a new survey.

Nigeria has moved into second place, from third last year, overtaking Egypt which is now in third position despite its continuing political upheavals. This is according to the Rand Merchant Bank’s (RMB’s) annual " Where to Invest in Africa: A guide to corporate investment" report.

The report places South Africa 33rd in the overall world rankings — its worst position ever. Nigeria, on the other hand, has improved 35 places in the past decade to rank 38th in the world index.

The researcher and co-author of the guide, Celeste Fauconnier, said the gap between the two African giants was narrowing because Nigeria was "doing well" while S A was "stagnating".

South Africa is placed second last in comparison with its fellow Brics (Brazil, Russia, India, China, South Africa) economies. China is ranked first, India eighth and Brazil 27th with Russia in last place at 34th.

Nigeria could replace South Africa in top place in the next two to four years, or even sooner, if the revisions to gross domestic product (GDP) under way see the size of the former’s economy adjusted upwards as much as 40%. This would put the West African country close to South Africa’s GDP of $384bn.

Nigeria’s GDP is now $268.7bn, according to the World Economic Forum (WEF).

Nigeria’s growth rate forecast at 6%-7% a year for the next five years, compared with South Africa’s forecast of 2%-3%. Therefore, the West African powerhouse could overtake South Africa as the continent’s largest economy by as early as next year.

Nigeria’s population of 162.5-million is more than triple that of South Africa’s 50.6-million, adding to its attraction.

The RMB survey finds the top 10 African countries remain the same as last year, though Nigeria and Egypt switched places. Ranked from fourth place to 10th are Ghana, Morocco, Tunisia, Libya, Ethiopia, Tanzania and Kenya.

The scores were finalised before the recent political disarray in Egypt and Libya, but Ms Fauconnier said RMB included them on the list as the research is meant to inform long-term investment decisions.

Egypt’s sizeable market and population, and decent operating environment with a highly diversified economy should make it an attractive destination once tensions subside. "Once political tension is resolved, we often see portfolio flows back into the country and these economies recover quite quickly from a growth rate perspective," Ms Fauconnier said.

Last week, South Africa fell one place from 52nd to 53rd out of 148 on the WEF global competitiveness list, as Mauritius overtook it to sub-Saharan Africa’s top spot. Nigeria is ranked 120th.

Labour discord, a failing education system and poor healthcare dragged down the South African ranking.

The WEF uses a different methodology than the RMB, assessing competitiveness based on the opinions of about 13,000 business leaders in 148 countries. It focuses on 12 pillars including institutions, infrastructure, macroeconomic environment, education and labour market efficiency.

RMB assigns investment attractiveness scores based on GDP, growth forecasts over the next five years and the operating environment.

The operating environment is assessed using the WEF global competitiveness index, the World Bank’s Doing Business report, the Heritage Foundation’s index of economic freedom and Transparency International’s corruption perceptions index.

Ms Fauconnier said South Africa’s growth was weak, but it remained top of the rankings because it had the largest market in Africa and a sophisticated operating environment.