A new report by EY’s, a global firm that provides advisory, assurance, tax and transaction services, indicated that that South Africa, Morocco, Kenya, Nigeria and Ethiopia were the dominant anchor economies within their respective regions in sub-Saharan Africa’s Foreign Direct Investment (FDI) projects in 2017.
This was contained in the latest Africa Attractiveness report titled ‘Turning tides’ published on Monday, which provides an analysis of FDI investment into Africa over the past 10 years.
The 2017 data showed that Africa attracted 718 FDI projects, representing six percent growth over the previous year’s figures, and aligned with a recovery in the continent’s economic growth, following a difficult preceding year.
According to the report, the higher project numbers were driven by interest in ‘next generation’ sectors, namely manufacturing, infrastructure and power generation. Despite the rise in FDI, project numbers remain below the 10-year average of 784 projects (per annum).
The report highlighted also the countries with the strongest FDI gains, with Ethiopia, Kenya and Zimbabwe experiencing a major uptick in FDI during the 2017 year while South Africa, Egypt, Mozambique and Cote d’Ivoire experienced declines in FDI projects in the same year.
The report indicated further that South Africa, Morocco, Kenya, Nigeria and Ethiopia collectively accounted for 40% of the continent’s total FDI projects in the year under review.
Overall, these four major sub-regions each attract similar FDI when measured by project numbers. For the first time ever, East Africa became the single largest beneficiary of FDI with 197 projects (27% of total projects). Southern Africa, by contrast, fared lowest of the four major regions, at 162 projects (23%).
Whilst South Africa remains the continent’s leading FDI destination when measured by project numbers, for the first time ever the country’s lead is under threat with Morocco increasing its FDI projects by a sizeable 19% to share the top spot with South Africa.
South Africa shares the title of largest African FDI hub with Morocco; Southern, West, East and North Africa all receive more or less equal FDI (measured in project numbers); The USA remains the single biggest country investing in Africa, while Western Europe is by far the biggest regional investor.
Commenting on the FDI trend generally, EY Africa CEO, Ajen Sita, said: “2017 was in many respects a key year for the continent. We saw multiple changes in leadership across a number of countries, including South Africa, Zimbabwe and Angola. In addition, Kenya’s election was drawn out which created uncertainty at the time. Changes in leadership have in turn led to a renewed urgency to implement fresh policies as new administrations move to address slow economic growth.”
“Over time and as Africa’s growth accelerates, we anticipate that South Africa’s share of inbound FDI will continue to decline, relative to the rest of the continent. This will be driven by sustained strong growth, particularly in the Eastern-hub economies, and revived growth in the West hub. It illustrates the need for South Africa to ensure its leading economic role across the continent is sustained”, Sita added.
The report stated further that emerging market investment into Africa in 2017 saw a noticeable decline in emerging market investment flows into Africa, representing a major turnaround from the previous year when Asia-Pacific investors strongly increased inbound investments.
For instance, the report noted that last year, investments from this region fell 16% while intra-African FDI also fell by 14%. It attributed the weaker intra-African flows to a weaker appetite by both Moroccan and Kenyan investors into neighbouring countries while South Africa’s outward investment project numbers held steady as weak domestic growth saw companies continue the search for external growth opportunities across the continent.
North American (primarily the USA), and Western European FDI flows to the continent remain strong.
After the USA, which remains the single largest country investing into Africa, three of the remaining top five investors are European, namely the UK, France and Germany. Of the ten largest investing countries in Africa, six are Western European
