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FDI into Africa declines to $71.3bn

26 July 2016, 09:21Memory Mataranyika

Harare – Foreign Direct Investments into Africa are on the decline as investor sentiment gets swayed by governance issues and and as economies in the region slow down.

A report by EY on the attractiveness of Africa on Monday showed the value of funds invested in African projects declined to $71.3bn in 2015.

The EY 2016 Africa attractiveness programme: Staying the course also showed that jobs created in Africa in 2015 were down compared to the previous year.

In 2014, foreign investors invested as much as $88.5bn into Africa while the average for the 2010 to 2014 period was $68bn, EY said. 

Ajen Sita, the Africa chief executive officer at EY, said GDP growth in South Africa “decline(d) sharply to below one percent” although the country also managed to avert a credit ratings downgrade.

“In Nigeria, the slowdown in that economy was impacted further by the decline in the oil price and currency devaluation pressure,” said Sita. Nigeria is Africa’s biggest economy while SA recently reclaimed 2nd place after overtaking Egypt.

“The reality is that economic growth across the region is likely to remain slower in coming years than it has been over the past 10 to 15 years, and the main reasons for a relative slowdown are not unique to Africa,” added Sita.

Southern Africa attracted the largest investment although “projects were down 11.6% from 2014 levels” while West Africa saw a rebound in FDI projects by 16.2%. In 2015, the region became the leading recipient of capital investment on the continent.

North Africa experienced 8.5% year-on-year growth in FDI projects. Furthermore, while projects are increasing in North Africa, they are increasing at a much faster rate than in Sub-Saharan Africa.

The report also notes that over the past 10 years, there has been a shift in sector focus in FDI from extractive to consumer-facing industries.

Mining and metals, coal, oil and natural gas, which were previously the key sectors attracting major FDI flows, have given way to consumer products and retail (CPR), financial services and technology, media and telecommunications (TMT), accounting for 44.7% of FDI projects in 2015.

“In 2015, further evidence of sector diversification came through, with business services, automotive, cleantech and life sciences all rising in significance and becoming the likely ‘next wave’ for investors,” further notes EY.

- Fin24


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