Morocco and South Africa have been named the continent’s leading destinations for Foreign Direct Investment (FDI).
According to Ernst and Young’s (EY’s) latest Africa Attractiveness report, FDI was up across the continent last year, although South Africa experienced a fall in project numbers, on the back of continued weak domestic growth.
The 2017 data shows that Africa attracted 718 Foreign Domestic Investment projects, which is up 6% from the previous year.
Now, South Africa shares the title of largest African FDI hub with Morocco. From the report, it emerged that Southern, West, East and North Africa all receive more or less equal FDI (measured in project numbers).
Meanwhile, the United States of America remains the single biggest country investing in Africa, while Western Europe is by far the biggest regional investor.
The EY 2018 report, titled ‘Turning tides’, provides an analysis of FDI investment into Africa over the past ten years. The 2017 data shows that Africa attracted 718 FDI projects which is up 6% from the previous year. This was in line with a recovery in the continent’s economic growth, following a difficult preceding year.
The higher project numbers were driven by interest in ‘next generation’ sectors, such as manufacturing, infrastructure and power generation. Despite the rise in FDI, project numbers remain below the 10-year average of 784 projects (per annum).
The report also highlights the countries with the strongest FDI gains, with Ethiopia, Kenya and Zimbabwe experiencing a major uptick in FDI during the 2017 year. By contrast, South Africa, Egypt, Mozambique and Cote d’Ivoire experienced declines in FDI projects in the same year.
“2017 was in many respects a key year for the continent. We saw multiple changes in leadership across a number of countries, including South Africa, Zimbabwe and Angola,” said Ajen Sita, EY Africa CEO.
“In addition, Kenya’s election was drawn out which created uncertainty at the time. Changes in leadership have in turn led to a renewed urgency to implement fresh policies as new administrations move to address slow economic growth,” Sita explained.
“2017 saw a noticeable decline in emerging market investment flows into Africa. This is a major turnaround from the previous year when Asia-Pacific investors strongly increased inbound investments. Last year, investments from this region fell 16% while intra-African FDI also fell by 14%,” EY said in its report.
“The weaker intra-African flows were largely driven by a weaker appetite by both Moroccan and Kenyan investors into neighbouring countries. South Africa’s outward investment project numbers held steady as weak domestic growth saw companies continue the search for external growth opportunities across the continent,” the consultancy added.
The report found that South Africa, Morocco, Kenya, Nigeria and Ethiopia were the dominant anchor economies within their respective regions, collectively accounting for 40% of the continent’s total FDI projects.
“Over time and as Africa’s growth accelerates, we anticipate that South Africa’s share of inbound FDI will continue to decline, relative to the rest of the continent. This will be driven by sustained strong growth, particularly in the Eastern-hub economies, and revived growth in the West hub. It illustrates the need for South Africa to ensure its leading economic role across the continent is sustained”, Sita concluded.