Africa: FDI increases, survey indicates

Foreign investors see the huge long-term growth possibilities that Africa presents according to Ernst & Young&#8217;s first Africa Attractiveness Survey. The survey predicts Foreign Direct Investment (FDI) into Africa will reach US$150 billion by 2015, resulting in hundreds of thousands of jobs. Foreign direct investment (FDI) projects show that in the last decade Africa has seen an increase of 87 per cent. Despite a drop in investment in the last couple of years following a peak in 2008, Africa has remained an attractive investment destination throughout the global downturn and has managed to maintain its relative share of global investment flows as a result. Strong growth in new projects into Africa is expected from next year with FDI inflows forecast to reach US$150b by 2015. Africa is still high on the agenda of global investors, with 42 per cent of the businesses surveyed considering investing further in the region and an additional 19 per cent of executives confirming they will maintain their operations on the continent. Ajen Sita, Managing Partner: Africa at Ernst & Young says, “FDI has a particularly important role to play as a future source of longer term capital for reinvestment in infrastructure initiatives and as an accelerator of sustainable growth across Africa. And there is far more to come.” Over the last decade investment from emerging markets into Africa has shown an annual growth of 13 per cent. From emerging market investors surveyed, three-fourth said that Africa has become a more attractive investment destination over the last three years. They are also increasingly positive about Africa’s long term investment potential. Developed regions such as Europe and North America are more hesitant, as a large proportion of respondents from these regions appear to believe that Africa’s progress has stalled over the last few years. However, North American respondents are more optimistic about Africa’s long term investment potential with Europeans remaining relatively pessimistic. While investors from developed markets are relatively more cautious about Africa, they still represent the largest proportional investment into Africa. Analysis of the projects shows that that investment success stories are spread across the Continent. Ten African countries attracted 70 per cent of the new FDI projects in the continent between 2003 and 2010 (South Africa, Egypt, Morocco, Algeria, Tunisia, Nigeria, Angola, Kenya, Libya, Ghana). There has also been a significant growth in the investment by African countries within Africa growing by 21% between 2003 and 2010. However, despite the considerable growth in the number of projects the amount of capital remains less than that provided by other emerging economies. Strong growth in new FDI into Africa is expected from 2012 onward, reaching US$150b by 2015. Besides the critical importance of capital and other long-term developmental initiatives, this will create a number of the other benefits, including an estimated 350,000 jobs. The GDP growth of the continent will continue to remain healthy averaging 5 per cent up to 2015. On the other hand, according to the survey, the levels of risk in investing in Africa can be high but levels of profitability are high too, with competition in some sectors comparatively low. Source: Degsew Amanu, AfricaNews reporter in Kampala, Uganda < Prev   Next >