FDI value jumps despite declining investment projects in Africa

The recent EY’s 2015 Africa attractiveness survey titled “Making choices”, has shown that Africa’s share of foreign direct investment (FDI) projects fell 8.4% in 2014, but remained well above pre-2008 levels.

However, foreign direct capital investment into the continent surged to $128billion, up 136% in 2014 – a five-year high, with the number of jobs created from FDI jumping 68% resulting in 188,400 new positions across Africa.

The report combines an analysis of FDI data into Africa since 2003, together with a survey of over 500 global business leaders, in over 30 countries, about their views on the potential of the African market.

In Sub-Saharan Africa (SSA), while key economies like South Africa, Angola, Nigeria, Ghana and Kenya received fewer FDI projects than in 2013, the average value of each project across the region more than doubled (from $67.8million in 2013 to $174.5million per project in 2014).

Mozambique (88.2%) and Ethiopia (47.1%) were among the star performers, attracting growing inflows of projects. Over the longer term, South Africa has been the most popular destination for FDI projects, attracting twice as many projects over the past five years than any other African country.

Ajen Sita, Chief Executive Officer at EY Africa, says: “In the past year, Africa has experienced stronger headwinds than in recent times. Consequently, economic growth this year is likely to be at its lowest in five years, dragged down by the impact of lower oil prices on the Nigerian and Angolan economies, the softening of other commodity prices, and South Africa’s sluggish growth. At the same time though, economic growth across the continent remains resilient. Sub-Saharan Africa will still experience the second highest economic growth rate in the world this year, with 22 economies growing at a rate of 5% or higher.”

Based on the results of the EY survey, perceptions of Africa’s attractiveness have deteriorated slightly over the past year.

Sita says: “The shift in perceptions is the lowest since we initiated our survey. However, it is important not to overstate this deterioration. Overall, a majority of respondents were positive about the progress made in Africa over the past year, and believe the continent’s attractiveness as a business destination will improve over the next three years. Africa continues to rank favorably compared to other regions, particularly among respondents who know Africa well.

In fact, those already doing business in Africa remain overwhelmingly positive, again ranking the region as the most attractive investment destination in the world.”

Iheanyi Nwachukwu