6 June 2018

Africa: FDI Flows to Africa Dip By 21% - Report

Foreign Direct Investment (FDI) flows to Africa last year dipped by a significant 21per cent to $42 billion, according to the World Investment Report 2018, that was launched on Wednesday by the UN Conference on Trade and Development (UNCTAD).

According to the report, the decline was concentrated in the larger commodity exporters.

A look at regional trends puts the latest FDI in Africa at a 10-year low.

"Weak oil prices and harmful lingering effects from the commodity bust saw flows contract, especially in the larger commodity-exporting economies. FDI inflows to diversified exporters, including Ethiopia and Morocco, were relatively more resilient," the report reads.

East Africa, it is noted, the fastest-growing region in Africa, received $7.6 billion in FDIs in 2017, a 3 per cent decline from 2016.

"Ethiopia absorbed nearly half of this amount, with $3.6 billion (down 10 per cent), and is now the second largest recipient of FDIs in Africa. Kenya saw an increase to $672 million, up 71 per cent, due to strong domestic demand and inflows into information and communication technology (ICT) sectors".

FDI flows to Central Africa decreased by 22 per cent to $5.7 billion. FDI to West Africa fell by 11 per cent to $11.3 billion, due to Nigeria's economy remaining depressed. FDI to Nigeria fell 21 per cent to $3.5 billion.

FDI flows to North Africa were down 4 per cent to $13 billion. Investment in Egypt was down, but the country continued to be the largest recipient in Africa. FDI into Morocco was up 23 per cent to $2.7 billion, including as a result of sizeable investments in the automotive sector.

In Southern Africa, FDI declined by 66 per cent to $3.8 billion. FDI to South Africa fell 41 per cent to $1.3 billion, due to an underperforming commodity sector and political uncertainty. In contrast, FDI into Zambia increased, supported by more investment in copper.

"The beginnings of a commodity price recovery, as well as advances in interregional cooperation through the signing of the African Continental Free Trade Area agreement, could encourage stronger FDI flows in 2018, provided the global policy environment remains supportive," the report says.

Leaders from 44 of the 55 AU member states in March met in Kigali and appended their signatures on the AfCFTA, a flagship project of Agenda 2063 of the Union expected to up intra-Africa trade by about 52 per cent.

Global flows of foreign direct investment (FDI) are forecast to increase only marginally in 2018 and remain well below the average over the past 10 years, according to the report.

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