South Africa’s story at the World Economic Forum Davos this year will be of the huge strides the country is making in skills development and innovation. (Image: Brand South Africa)

FDI to Africa Defies Global Slump, Rises 11%

ADDIS ABABA – Africa escaped the global decline in foreign direct investment (FDI) as flows to the continent rose to US$46 billion in 2018, an increase of 11% on the previous year, revealed UNCTAD’s World Investment Report 2019.

Growing demand for some commodities and a corresponding rise in their prices as well as the growth in non-resource-seeking investment in a few economies underpinned the rise.

While FDI in some large economies on the continent – such as Nigeria and Egypt – contracted, this was outweighed by a surge in flows to others, most significantly, South Africa.

In terms of regional distribution, FDI flows to North Africa climbed by 7% to 14 billion USD, but Egypt continued to be the largest FDI recipient in Africa despite contracted investment (down by 8% to 6.8 billion USD).

FDI flows to Sub-Saharan Africa climbed by 13% to 32 billion USD, recovering ground after successive contractions in the two prior years.

Southern Africa saw the biggest turnaround, with flows recovering to 4.2 billion USD after net divestment of 925 million USD the previous year.

FDI in South Africa more than doubled to $5.3 billion, although this was largely attributable to intracompany transfers by established investors.

Ethiopia Tops East Africa

In East Africa, FDI held steady at 9 billion USD, the fastest-growing region of the continent.

Ethiopia topped the region, even as flows to the country declined by 18%, to 3.3 billion USD.

Flows to Kenya swelled by 27% to 1.6 billion USD, due to investment in diverse sectors, including manufacturing, hospitality, chemicals and oil and gas.

On the other hand, FDI to West Africa declined by 15%, to $9.6 billion, largely due to Nigeria where flows plunged by 43% to 2 billion USD.

Flows to Ghana also dipped, albeit by a more moderate 8%, to $3 billion.

Looking ahead

According to the Report, multinational enterprises from developing countries are expanding their activities in Africa but investors from developed countries remained the key players.

Based on data through 2017, France is the largest investor in Africa, although its stock of investment has remained largely unchanged since 2013, followed by the Netherlands, the United States, the United Kingdom and China.

Growing demand and a corresponding rise in the price of commodities, of which Africa is a key producer, are expected to prop up FDI flows to the continent in 2019.

Closer regional integration aided by the AfCFTA can also draw additional FDI flows.

“The African Continental Free Trade Area (AfCFTA) agreement will bolster regional cooperation. This, along with upbeat growth prospects, augurs well for FDI flows to the continent,” UNCTAD Secretary-General Mukhisa Kituyi said.