FDI Inflow Dips As FDI Outflow Rise In Africa

Foreign Direct Investment

Despite the strong increase that characterized foreign direct investment in Africa, the early 2000s, 2016 and 2017 saw a downfall in the level of foreign direct investment in Africa. FDI inflow into Africa declined by 21 percent from its 2016 level to $42 billion in 2017. North Africa received the largest share of the FDI inflow into Africa in 2017, about 31 percent of the total FDI ahead of West Africa which came second with about 27 percent of total FDI inflow to Africa. However, it can be observed the beyond the decline in total value of FDI to Southern Africa, the share of this region’s total FDI inflow to Africa declined from 23 percent in 2016 to less than 10 percent.

Inflow into North Africa decreased by 4 percent and stood at $13 billion in 2017.According to the UNTCAD’s world investment report (WIR), Egypt had the highest FDI inflow in Africa in 2017 with a value of $7.4 billion, although it was lower than 2016 level by 9 percent. The flow of FDI into Egypt was sustained by Chinese investment across light manufacturing industries and economic reforms were implemented. However, Morocco witnessed a significant growth the region, experiencing 23 percent growth to $2.7 billion dollars. According to WIR, this growth in FDI in Morocco was largely driven by the automobile industry with 26 industry investment worth $1.45 billion including a deal with Renault. FDI into Algeria fell to $1.2 billion representing a 26 percent decline from 2016 level. Algeria witnessed a boost in its diversification drive, as Samsung opened its first smartphone assembly plant in the country and Huawei helped with Houari Boumediene Airport. FDI inflow into Sudan remained stable at $1.1 billion, as it witnessed significant Chinese investment into it oil sector, following the agreement reached with China to access Sudan’s productive oil fields.

FDI inflow into West Africa declined by 11 percent to 11.3 billion. This let down can be attributed to the poor economic performance of the Nigerian economy which saw a decline in it FDI inflow in 2017 by 21 percent to $3.5 billion. Although a number of policies especially as it relate to the foreign exchange market were put in place, these policies were only successful in attracting portfolio investment (hot money) rather than foreign direct investment. FDI inflow into Ghana declined by 9 percent to $3.5 billion and this was largely driven by a stable gold price and the ENI engagement with Sankofa in which it owns 44 percent stake, this investment represent vast proportion on the FDI inflow to Ghana in 2017.

In Southern Africa, FDI inflow declined by 66 percent to $3.8 billion in 2017. FDI inflow into South Africa declined by 41 percent to $ 1.3 billion in 2017. Another stand out FDI inflow, was DuPon investment in a regional draught crop research center. Angola witnessed a capital reversal as foreign affiliate in the countries transferred funds abroad through intra-company loans and this resulted in FDI inflow turning negative from a $4.1billion in 2017 to -$2.3 billion in the same year.

In East Africa, FDI inflow declined by 3 percent to $7.6 billion in 2017. Ethiopia witnessed an FDI inflow decline of 10 percent to $3.6 billion, which is almost half of the FDI inflow to the region. This inflow was due to the investment of Chinese and Turkish firms in light manufacturing and automotive as well as setting up factories by PVH (Calvin Klein and Tommy Hilfiger), Levis, Zara, Under Armour, Giorgi Armani and Hugo Boss, which are located in Hawassa Industrial Park. FDI inflow into Kenya increased by 71 percent to $672 million, as government tax incentives seem to drive investors. Boeing, Microsoft, Oracle, Diageo, Johnson and Johnson, Nasper, MTN and Intact Software all kept expanding their investment in Kenya.

In Central Africa, FDI inflow declined by 22 percent to $5.7 billion in 2017.  Congo witnessed a 67 percent to $1.2 billion from $3.6 billion in 2016, due to volatility in oil FDI and weak FDI in non-oil. However, Glencore bought two mining assets for nearly $1 billion, thereby increasing in stake in cobalt and copper mines. Equatorial Guinea witnessed a 462 percent increase in FDI inflow from $54 million to $304 million in 2017, while FDI inflow in Gabon increased by 21 percent to $1.5 billion.

FDI outflow from Africa increased by 8 percent to $12.1 billion in 2017. South Africa firms witnessed a 64 percent increase in FDI outflow to $7.4 billion and this represented 61 percent of the total FDI outflow from Africa. Morocco also witnessed a significant increase in FDI outflow of 66 percent up to $960 million while, FDI outflow from Nigeria remained Stable at $1.3 billion.

FDI Inflow into Africa, 2011-2017 ($’billion) Source: UNTCAD’s World Investment Report, 2018
Africa FDI outflow, 2011-2017 ($’billion) Source: UNTCAD’s World Investment Report, 2018

 

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