In the last decade Africa has seen an increase in inward FDI from 338 new projects to the continent in 2003 to 633 in 2010 (an increase of 87%). 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 $150b by 2015.
When it comes to future investment strategies Africa is high on the agenda of global investors, with 42% of the businesses surveyed considering investing further in the region and an additional 19% of executives confirming they will maintain their operations on the continent. Those companies that have invested and already integrated Africa into their overall investment strategy are particularly positive.
Over the last decade investment from emerging markets into Africa has increased rapidly from 100 new projects in 2003 to 240 in 2010 (representing an annual growth of 13% per year). Emerging markets investment now comprises 38% of the total into Africa; up from 30% in 2003.
Mark Otty, Area Managing Partner Ernst & Young Europe, Middle East, India and Africa comments, There has been a fundamental shift in the global economy over the past few years, with emerging markets not only dominating investor attention and capital flows, but also playing an increasingly strategic role in defining the global economic agenda.
Developed regions such as Europe and North America are more ambivalent, as a large proportion of respondents from these regions appear to believe that Africas progress has stalled over the last few years. However, North American respondents are more optimistic about Africas 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 and, critically, this investment is going into a diverse range of sectors beyond natural resources.
Unsurprisingly, the large majority of respondents view the extractive industries as a major area of investment perceiving it to be the sector with the greatest growth potential over the next few years. However, a more diverse range of sectors are now beginning to emerge as attractive investment options, with tourism (15%), consumer products (15%), construction (14%), telecommunications (13%) and financial services (9%) featuring strongly as offering high growth potential among respondents.
Analysis of the projects shows that that investment success stories are spread across the Continent. Ten African countries attracted 70% of the new FDI projects in Africa between 2003 and 2010 (South Africa, Egypt, Morocco, Algeria, Tunisia, Nigeria, Angola, Kenya, Libya, Ghana).
Although the majority of respondents are optimistic about Africas future, most of them believe that the continent will only offer high and robust growth potential over the longer term (i.e. beyond three years). Strong growth in new FDI into Africa is expected from 2012 onward, reaching $150b by 2015. Besides the critical importance of capital, which can continue to be reinvested in infrastructure, and other long-term developmental initiatives, this will create a number of the other direct and indirect benefits. Not least among these will be job creation; in 2015 alone, the estimated number of jobs created will be over 350,000.
There are of course parts of the Continent where there are real and perceived barriers to investment due to political instability and corruption. These are obvious challenges but those investing in Africa and Africans themselves have much to be positive about. We are confident that Africa is on a sustainable growth curve and that FDI rates will steadily grow. However, to accelerate and take advantage of this growth process, governments and investors foreign and domestic should act now. The earliest to do so, and the canniest, will benefit the most, says the report.
Post published in: News