Africa's shifting FDI landscape by Nurmara

Total foreign direct investment (FDI) into Africa reached $40bn in 2018, up 6% on the previous year. This remains well below levels seen before the commodities slump, which exceeded $60bn in 2015.

Between 2016 and 2017 investment fell by 21%, driven by a slowdown in key oil-exporting economies like Nigeria and Angola, as well as South Africa.

The steep decline reflects a lack of diversification in FDI to the continent, which is dominated by the natural resource sector and a few key markets.  

In 2018 Egypt ($7.9bn), South Africa ($7.1bn), Ghana ($3.3bn), Ethiopia ($3.1bn) and Nigeria ($2.2bn) accounted for more than half of total FDI. 

The good news is that investment could grow at a higher pace in 2019, driven by stabilizing commodity prices and progress towards implementing the African Continental Free Trade Area.

Emerging Investors

Another silver lining is Africa’s shifting FDI profile. While the US and UK - two traditional source markets - were the two biggest investors in 2017, new contenders like China are catching up.

Beijing’s FDI stock more than doubled to $40bn from 2011 - 2016, while investment levels from the US remained the same at $57bn. China is also investing in more diverse sectors as its engagement moves beyond a focus on natural resources. Technology in particular is seeing a surge, with big names like Huawei, Alibaba and Xiaomi rolling out new strategies.

This is just part of surging interest from an increasingly diverse set of suitors. The likes of India, Russia, Japan and Turkey are all in the midst of ramping up FDI to Africa.

More recently there has also been a surge in investment from the Middle East, led by the UAE, Saudi Arabia, and Qatar into everything from port infrastructure, to oil and gas and the hospitality sector.

Assuming Africa can whether the effects of a dimming global outlook, and the escalating US-China trade war, there is cause for cautious optimism.