FDI

Foreign Direct Investment

If you compare Africa’s 2015 FDI profile with that of 2010’s, they’re remarkably similar, attracting roughly US$55bn in inflows.

FDI flows

Source: RMB Global Markets
  • Above US$3bn
  • US$1bn to US2.9bn
  • US$1bnto US$1.9bn
  • US$05.bn to US$1bn
  • Below US$0.5bn

Inflows

While the size of the flows were similar, the regional distribution differed markedly. Prior to the Arab spring, North Africa accounted for almost one-third of the continent’s inflows while in 2015, the greatest proportion of monies was channelled into Southern Africa.

And, while East Africa captured a modest portion of flows at the turn of the decade, it was virtually on par with West Africa in 2015.

Despite uninspiring levels of FDI growth in 2015, Africa continued to attract more investment than South and West Asia, Oceania and transitional economies.

We expect modest gains in 2016 due to liberalization measures and the planned privatisations of state-owned enterprises, although muted global economic growth will put a cap on investment.

Outflows

Africa’s investments abroad grew substantially between 2010 and 2014 but tapered in 2015 as South African, Nigerian and Angolan investors shrank their investment portfolios abroad owing to weak commodity prices, anaemic demand from primary trading partners and currency volatility.

Over the years Southern Africa, and more specifically South Africa, has assumed the role of the continent’s principal investor among its regional peers. A sizeable reduction in South Africa and Angola’s offshore investments resulted in a 70% decline in in total outflows in 2015.

We expect modest gains in 2016 due to liberalization measures and the planned privatisations of state-owned enterprises, although muted global economic growth will put a cap on investment.

Regional FDI inflows and outflows since 2010

Source: IMF

Chief investors

In keeping with historical trends, developed markets led new investments in Africa in 2015. The UK outshone the US and France, registering total FDI stock of US$66bn.

Developing countries are acquiring an eye for African investments. Five of the continent’s top 10 investors in 2015 hailed from developing economies, with China’s investments more than doubling since 2009.

Top 10 FDI investors

Source: UNCTAD, RMB Global Markets

According to UNCTAD, North and East Africa will present the highest number of investment opportunities in 2016.

Greenfield project announcements suggest that services (i.e. electricity, gas and water, construction, and transport) will attract a large proportion of FDI followed by manufacturing industries.

East Africa’s light manufacturing capabilities enhances its appeal as an investment destination as well a potential source of intra-regional FDI.

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