By Dipo Olowookere
A total of 676 foreign direct investment (FDI) projects were attracted by Africa in 2016, out of which Egypt, Kenya, Morocco, Nigeria and South Africa (the key hub economies) collectively attracted 58 percent, an EY Africa Attractiveness report has disclosed.
However, the report named South Africa as the largest FDI hub in Africa.
The latest Africa Attractiveness, seen by Business Post, provided an analysis of FDI investment into Africa over the past ten years.
The 2016 data showed a decline of 12.3 percent from the total of number of FDI projects attracted the previous year by Africa.
Also, the FDI job creation numbers declined by 13.1 percent, but the capital investment rose by 31.9 percent during the period under review.
The surge in capital investment was primarily driven by capital intensive projects in two sectors, namely real estate, hospitality and construction (RHC), and transport and logistics. The continent’s share of global FDI capital flows increased to 11.4 percent from 9.4 percent in 2015. This made Africa the second-fastest growing FDI destination by capital.
Commenting on the report, Africa CEO at EY, Ajen Sita, noted that, “This somewhat mixed picture is not surprising to us. Investor sentiment toward Africa is likely to remain somewhat softer over the next few years.
This has far less to do with Africa’s fundamentals than it does with a world characterised by heightened geopolitical uncertainty and greater risk aversion. Investors with an existing presence in Africa remain positive about the continent’s longer-term investment attractiveness, but they are also cautious and discerning.”
Asia-Pacific investors are bullish on Africa
In a sign of ongoing diversification of Africa’s FDI investors, more than one fifth of FDI projects and more than half of capital investment into Africa came from Asia-Pacific in 2016, an all-time record. Most notably, Chinese FDI into Africa increased dramatically, making the country the single largest contributor of FDI capital and jobs in Africa in 2016.
Foreign investors refocus on Africa’s hub economies
South Africa remains the continent’s leading FDI destination, when measured by project numbers, increasing 6.9 percent. Morocco regained its place as Africa’s second largest recipient with projects up by 9.5 percent, followed by Egypt, which attracted 19.7 percent more FDI projects than the previous year.
New investment hubs appear in East and West Africa
Although foreign investors still favour the key hub economies in Africa, a new set of FDI destinations is emerging, with Francophone and East African markets of particular interest.
Despite having a 31.7 percent decline in FDI projects in 2016, and weak growth in recent years, West Africa’s second largest economy, Ghana, remains a key FDI market. The country’s improving macro-economic environment and strong governance track record has seen Ghana rise to fourth position in the EY Africa Attractiveness Index (AAI). The index was introduced in 2016, to measure the relative investment attractiveness of 46 African economies based on a balanced set of shorter and longer-term metrics.
Staying in West Africa, Cote d’Ivoire also features in the top 10 of the AAI, and with a 21.4 percent jump in FDI projects in 2016, this illustrates that it’s becoming a country more favoured by investors.
Also in the west, Senegal has emerged as a potential major FDI destination although this is not reflected in its current FDI numbers. It does however rank strongly on the AAI 2017, taking eighth position, due to its diverse economy, strong strides in macro-economic resilience and progress in improving its business environment.
Adedapo Adesanya