A report by Rand Merchant Bank (RMB) once again ranked South Africa as the most attractive African investment destination, but the gap was closing rapidly.

In its second edition of ‘Where to Invest in Africa’, RMB noted that South Africa scored 5.84, followed closely by Egypt and Nigeria, with scores of 5.52 and 5.50 respectively.

The report, which, for the first time, included North African countries, measured an African country’s market size, as measured by gross domestic product (GDP) at purchasing power parity; the market growth rate, as reflected in the International Monetary Fund’s forecasts of real GDP growth; and an operating environment index, which looks at economic freedom, corruption, efficiency and business friendliness.

Ghana and Tunisia also ranked in the top five, achieving scores of 5.42 and 5.41 respectively, while Morocco ranked in sixth place with a score of 5.35, followed by Libya, which ranked 18 in the prior year, with 5.29.

Ethiopia, Kenya and Tanzania, scoring 5.07, 4.99 and 4.98 each, completed the top-ten list of investment destinations in Africa.

Kenya, Tanzania, Uganda and Rwanda were found to be the most attractive East African countries, while Tunisia and Morocco were the most notable North African economies, RMB said in its report.

“The North African economies, which entered the rankings this year, take many of the top positions. Even with the political problems surrounding the Arab spring and the resulting decline in their operating index, they remain relatively attractive markets,” said RMB.

However, RMB warned that, while Africa was still a desirable investment destination, Africa would need to fast-track its progress if it was going to compete with other rapidly growing emerging markets.

The report pointed out that West and Central Africa rated poorly, but Cote d’Ivoire recently entered the growth race after easing of political tensions.

Sub-Saharan country Angola remained a tough place to do business, despite its rapid growth and its position as the third-largest economy in the region.

Djibouti, São Tomé and Príncipe, Eritrea, Guinea-Bissau and Comoros were the lowest-ranking countries in Africa.