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, according to 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.
“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
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.
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.More