Africa is attracting less Foreign Direct Investment, according to the recent EY Africa Attractiveness report. Data from 2016 shows that Africa attracted 676 FDI projects which is a 12.3 percent decline from the previous year and FDI job creation numbers declined 13.1 percent.
On the other hand, findings of the report also show that capital investment rose by 31.9 percent driven mostly by capital intensive projects in different sectors such as real estate, hospitality, construction as well as transport and logistics.
The continent’s share of global FDI capital flows increased to 11.4 percent from 9.4 percent in 2015. This made Africa the second-fastest growing FDI destination by capital.
According to Ajen Sita, Africa CEO at EY, investors with an existing presence in Africa are optimistic about Africa’s attractiveness for investment.
“This somewhat mixed picture is not surprising to us. Investor sentiment toward Africa is likely to remain somewhat softer over the next few years. This has far less to do with Africa’s fundamentals than it does with a world characterized by heightened geopolitical uncertainty and greater risk aversion. Investors with an existing presence in Africa remain positive about the continent’s longer-term investment attractiveness, but they are also cautious and discerning,” Sita stated.
For Africa, 2016 marked the worst year for economic growth across Sub-Saharan Africa region in over 20 years. The report points out that the overall slowdown in growth masks a significant variance in economic performance across different African economies.
It points out that even Sub-Saharan Africa’s three largest economies-Nigeria, South Africa and Angola, saw a sharp downward revision in growth forecast, a diverse group of the secondtier economies in Africa, including Cote d’Ivoire, Senegal, Ethiopia, Kenya, Tanzania, Mozambique and Egypt, are expected to sustain high growth rates over the next five years.
Findings also show that more than half of capital investment into Africa came from Asia-Pacific in 2016. Most notably, Chinese FDI into Africa increased dramatically, making the country the single largest contributor of FDI capital and jobs in Africa in 2016.
Countries such as Egypt, Kenya, Morocco, Nigeria and South Africa referred to as the key hub economies, collectively attracted 58 percent of the continent’s total FDI projects in 2016.
South Africa continues to top as the continent’s leading FDI destination, when measured by project numbers, increasing 6.9 percent. Morocco regained its place as Africa’s second largest recipient with projects up by 9.5 percent, followed by Egypt, which attracted 19.7 percent more FDI projects than the previous year.
By 2030, Africa remains on track to be a USD 3 trillion economy, but, growth needs to become more inclusive and sustainable to eradicate poverty.
“If we accept the reality that physical connectivity – enabled by regional integration and the development of physical infrastructure – will remain a key stumbling block to inclusive growth across Africa for at least the next decade, then the need to actively embrace digital connectivity becomes critical. However, an effort to harness the potential of digital technologies as a fundamental driver of inclusive growth is still far too piecemeal and fragmented,” Sita points out.
The CEO also pointed out that what is required is a far more collaborative effort between governments, business and non-profit organizations to adopt technological disruption, and create digitally enabled offerings with a particular focus on health, education and entrepreneurship.