Investors are lining up to back Africa despite all the bad talk

Africa is getting a far higher share of global foreign direct investment (FDI) than ever, even though investment flows around the world have slowed, reports Business Times.

On the continent, sub-Saharan Africa is now the preferred regional destination as North Africa’s attractiveness has waned.
These are two of the most important findings of the fourth Africa Attractiveness Survey compiled by global consulting firm, EY.

The survey, titled Executing Growth, polled 500 business leaders, financial directors and investors from 34 countries on their views of Africa as an investment destination, and compared those perceptions with the raw figures for new capital and job formation in global regions. In coming to its conclusions, it excluded joint ventures and mergers and acquisitions.

What this showed was that while FDI projects in Africa dropped 3.1% and job formation fell 9.1% last year, the total value of FDI grew 12.9%. The average size of FDI projects in Africa rose to R729m — above the 2008, pre-financial crisis figures.

This was significant, and showed that Africa now trails only Western Europe in the tussle for foreign investment.

EY Africa CEO Ajen Sita said it was a pity that perceptions of the ease of doing business in Africa and challenges such as corruption tended to be based on the lowest common denominator. In Asia, this bias was reversed.
“The risks in Africa exist, but tend to be overstated. Political risk has become better understood, and it’s now down to details in the ease of doing business, logistics, licences, routes to market and finding skills. Red tape is still a worry, though it is improving,” he said.

Within the continent, FDI in sub-Saharan Africa rose 4.7% (this region now gets 80% of the flows to the continent) while investment in North Africa has dried up thanks partly to political instability.

Egypt, Morocco, Nigeria, Tunisia, Kenya, Angola and Ghana follow South Africa in attracting FDI inflows.

The UK remains the leading investor in Africa (104 projects), followed by the United States (78), but another major trend is of FDI flows from other African countries, such as South African firms spreading their tentacles north.

A decade ago, intra-African FDI accounted for just 8% of flows — now it is 23%.

South Africa is placed third among all investors investing in Africa, with 63 projects.

Although Africa trails investment flowing to some other developing countries such as India, investors are clearly seeing dollar signs in the fact that Africa’s collective economy has trebled during the past decade.

The survey explodes a number of myths about South Africa — notably, that it isn’t as attractive as it once was, and is now at risk of losing its status as a gateway to the rest of the continent