Foreign Direct Investment into Africa increased by 11% in 2018 – UNCTAD

A World Investment Report released by the United Nations Conference on Trade and Development (UNCTAD) states that Africa experienced an 11% increase in Foreign Direct Investment (FDI) in 2018 over the previous year.

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 to US$46 billion

Though the continent cumulatively experienced an increase, some large economies like Nigeria and Egypt had a decline.

Here is a summary of the situations per region:

North Africa

FDI flows to North Africa climbed by 7% to $14 billion.

Investments in Egypt contracted (down by 8% to $6.8 billion), but the country continued to be the largest FDI recipient in Africa.

FDI to Morocco increased by 36% to $3.6 billion on the back of sizeable investments in finance and the automotive sector.

Sub-Saharan and Southern Africa

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

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

Angola remained negative (-$5.7 billion), mainly as a result of oil and gas firms transferring funds to parent companies through intracompany loans.

East Africa

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

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

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

West Africa

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

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

Looking ahead

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 African Continental Free Trade Area (AfCFTA) can also draw additional FDI flows.

While investment in manufacturing and services is likely to be sustained, this is expected to be confined to a few countries in North and Southern Africa, and the emerging manufacturing hubs in East Africa.

For the full World Investment Report, click here