Harare – Africa’s share of global FDI has grown over the past five years highlighting growing interest in the continent by foreign investors.
This is according to the third Africa Attractiveness Survey, which is conducted annually by Ernst & Young.
The survey shows that the continent’s share of global FDI has grown from 3.2 percent in 2007 to 5.6 percent in 2012.
Notably, much investment is coming from emerging markets, signaling greater South-South co-operation and trade among developing countries.
FDI from developed markets fell by 20 percent from 2011 to 2012 levels. Although FDI projects from the UK grew by nine percent year-on-year, those from the US and France — the other two leading developed market investors in Africa — were considerably down.
In contrast investments from emerging markets into Africa grew again in 2012, continuing the trend over the past three years.
In the period since 2007, the rate of FDI projects from emerging markets into Africa has grown at a healthy compound rate of over 21 percent. In comparison investment from developed markets has grown at only eight percent. The top contributors from the emerging markets are India, South Africa, the UAE, China, Kenya, Nigeria, Saudi Arabia and South Korea, who were rated among the top 20 investors in the world over that period. Intra-African investment has been particularly impressive during the same period, growing at 33 percent compound rate.
South Africa has been at the forefront of growth in intra-African trade and broader emerging market investment.
Kenya and Nigeria have also invested heavily and it is expected that countries like Angola, for example, with a US$5 billion sovereign wealth fund, will become increasingly prominent investors across the c ntinent over the next few years.
Ajen Sita, Ernst & Young’s Africa managing partner commented: “There is a growing confidence and optimism among Africans themselves about the continent’s progress and future.”
There has also been an important shift in emphasis in investment into the continent over the past few years, in terms of both destination markets and sectors. While investment into North Africa has largely stagnated, FDI into the rest of the continent has grown at a compound rate of 22 percent since 2007.
Among the star performers attracting growing numbers of projects have been Ghana, Nigeria, Kenya, Tanzania, Zambia Mozambique, Mauritius and South Africa.
The report shows some progress in terms of investor perceptions since the inaugural survey in 2011. The majority of respondents are positive about the progress made and the outlook for Africa.
The continent also gained ground relative to other global regions.
In 2011 Africa was only ranked ahead of two other regions, while this year it ranked ahead of five other regions (the former Soviet States, Eastern Europe, Western Europe, the Middle East and Central America). Notably, South Africa remained the African country which was considered most attractive for foreign investors, but several other countries are set to come through in a major way.
The survey combines an analysis of international investment into Africa over the past five years with a 2013 survey of over 500 global business leaders on their views on the potential of African markets.
The large majority of respondents view South Africa as the most attractive African country in which to do business: 41 percent of all respondents put South Africa in first place, while 61 percent included it in their top three. The primary reasons for South Africa’s popularity appear to be it relatively well developed infrastructure and a relatively large domestic market. The next most popular countries were Morocco (20 percent placing in the top three, and eight percent in first place), Nigeria (20 percent in top three, and six percent in first place), Egypt (15 percent top three and five percent first), and Kenya (15 percent top three and four percent first). Mark Otty of Ernst & Young said, “A process of democratisation that has taken root across much of the continent; ongoing improvements to the business environment; exponential growth in trade and investment and substantial improvements in the quality of human life have provided a platform for the economic growth that a large number of African economies have experienced over the past decade.” Despite the impact of the ongoing global economic situation, the size of the African economy has more than tripled since 2000.
The outlook also appears positive, with the region as a whole expected to grow by four percent for 2013 and 4.6 percent for 2014. A number of African economies are predicted to remain among the fastest growing in the world for the foreseeable future.
Some 86 percent of those with an established presence on the continent believe that Africa’s attractiveness as a place to do business will continue to improve.