Foreign direct investmentForeign direct investment in Sub Saharan Africa on the rise

Published 31 March 2016

Foreign direct investment (FDI) in Sub-Saharan Africa has increased by 4.7% in 2013 while it has declined in North Africa, and intra-African investment is on the rise. Investors shift from extractive industries to consumer-related sectors. There have been dramatic improvement in investor perception about the attractiveness of Africa for investors, but stubborn perception gap remains between investors already operating on the continent and those who are not.

Africa’s share of global foreign direct investment (FDI) projects has reached the highest level in a decade, according to Executing Growth, EY’s 2014 Africa Attractiveness Survey.

The report combines an analysis of international investment into Africa since 2003, with a 2014 survey of over 500 global business leaders about their views on the potential of the African market. The latest data shows that while there has been a decline in FDI project numbers from 774 in 2012 to 750 in 2013, primarily due to ongoing uncertainty in North Africa, they remain easily in excess of the pre-crisis average of 390 projects per year.

There is a noticeable divide between FDI trends in North Africa versus Sub Saharan Africa (SSA). While FDI projects in North Africa declined by nearly 30 percent, projects in SSA increased by 4.7 percent, reversing the decline of 2012. This further widened the gap between the two sub regions, with SSA’s share of FDI projects exceeding 80 percent for the first time.

While the UK remains the lead investor into the continent, intra-African investment continues to steadily rise. Investors are also looking beyond the more established markets of South Africa, Nigeria, and Kenya to expand their operations, as well as moving into more consumer-related sectors as Africa’s middle class expands.

Ajen Sita, Chief Executive Officer, EY Africa, comments, “Africa’s share of global FDI projects has grown steadily over the past decade and it is a promising sign that investors are now looking across the continent and to new sectors. Further regional integration and infrastructure development should continue to entice investors to the exciting investment opportunities that Africa can offer.”

New FDI hotspots are emerging
There was significant movement in the list of top ten countries by FDI projects in 2013. Only South Africa and Nigeria retained their first and third positions from 2012 with 142 projects and 58 projects, respectively. However, FDI projects in both these countries witnessed a slight decline. Countries such as Kenya with 68 projects, Ghana with 58 and Mozambique with 33 all moved up the ranks.

Zambia and Uganda were the new entrants in the top 10 list in 2013 with 25 and 21 projects respectively, an increase of more than 20 percent. In contrast, North African countries such as Morocco, Tunisia (ranked 8th in 2012) and Egypt slipped on the rankings.