Addis Ababa — East Africa exhibits the lowest in-flow of Foreign Direct Investment (FDI) when compared to other African recipients, a new United Nations investment review revealed.

While FDI inflows to Africa reached a record high of US$ 88 billion in 2008, the inflow into East Africa represents a mere 5% ($4 billion) of the total, almost the same as the previous year, the UNCTAD´s annual review of investment trends indicated.

The report said FDI inflows increased in seven countries within the sub-region, namely Comoros, Djibouti, Madagascar, Mauritius, Seychelles, Uganda and Tanzania.

Madagascar, Uganda and Tanzania received large inflows of FDI, particularly through cross-border Mergers and Acquisitions.

"These were mainly in expansion projects relating to several natural resource exploitation ventures that were already ongoing, and mostly before the onset of the global financial crisis and deteriorating economic prospects" the yearly UN report showed.

The report also indicated there is likely to be a leveling off or decline in FDI inflows to the sub-region in particular and the continent in general in 2009.

"This is due to a crisis-induced lull in the global demand for commodities, which is a major attraction for FDI in these economies," the report indicated.

The drastic fall in FDI to the continent in the first quarter of 2009 has important ramifications for development activities, as FDI is a major contributor to gross fixed capital formation with a 29% share in 2008.

The report also noted FDI flows to the continent continued to be highly concentrated in only a few countries during 2008, marked by particularly strong growth in-flows to West Africa.

Countries such as Ghana and Guinea saw their annual inflows more than double, to well above $1 billion each.

In Southern Africa, the increase in FDI inflow was almost entirely due to the strong performance of Angola and South Africa, it indicated.

Bucking this upward trend, the report also said in North Africa there were declines in inflows to Egypt (even after the $15 billion purchase of OCI Cement Group by Lafarge SA), the Libyan Arab Jamahiriya and Morocco.

The report noted the prospects for FDI in Africa are intimately tied to the revival of global markets.

The UN report said while China has increasingly become an important investor there, developed countries -especially the United States and European Union nations - remain crucial markets and sources of capital.

Responses to UNCTAD´s World Investment Prospects Survey 2009-2011 indicated that compared to the survey of the previous year, Transnational Corporation the world over are planning an increase in both the number and value of investments in Africa by 2011.