Africa’s share of global foreign direct investment (FDI) has increased to 5.6% in 2012 from 3.2% in 2007, highlighting the growing interest from foreign investors, global consultancy Ernst & Young said in its third Africa Attractiveness Survey. The survey showed that investment in FDI projects from developed markets fell 20% last year as a 9% y/y growth in FDI projects from the UK was offset by a considerable drop from the US and France — the other two leading developed market investors in Africa. On the other hand, investments from emerging markets into Africa grew again in 2012, continuing the trend over the past three years.
In the period since 2007, FDI projects from emerging markets into Africa have grown at a compound rate of over 21%, intra-African investment has grown at 33% compound rate. while investment from developed markets has grown at only 8%. The top contributors from the emerging markets over the last five years are India (with 237 FDI projects), South Africa (235), the UAE (210), China (152), Kenya (113), Nigeria (78), Saudi Arabia (56) and South Korea (57) all among the top 20 investors over that period. It is expected that other countries such as Angola, for example, with a USD 5bn sovereign wealth fund, will become increasingly prominent investors across the continent over the next few years.
According to Ajen Sita, Ernst & Young’s Africa Managing Partner, there is a growing confidence and optimism among Africans themselves about the continent’s progress and future. Among the top performers attracting growing numbers of FDI projects over the last five years have been Ghana, Nigeria, Kenya, Tanzania, Zambia Mozambique, Mauritius and South Africa.
Ernst & Young’s 2013 survey of over 500 global business leaders about their views on the potential of the African market showed that 86% of those with an established presence on the continent believe that Africa’s attractiveness as a place to do business will continue to improve, and they ranked Africa as the second most attractive regional investment destination in the world after Asia. Only 47% of those with no business presence in Africa believe Africa’s attractiveness will improve over the next three years, and they rank Africa as the least attractive investment destination in the world. The main challenges for investors in Africa are transport, logistics and electricity infrastructure, and anti-bribery and corruption. Ernst & Young’s analysis shows that in 2012 there were over 800 active infrastructure projects across different sectors in Africa, with a combined value of more than USD 700bn. The majority of infrastructure projects are related to power (37%) and transport (41%).
South Africa is viewed as the most attractive African country in which to do business with 41% of the respondents putting it in first place, while 61% including it in their top three, thanks to its relatively well developed infrastructure, a stable political environment and a relatively large domestic market. The next most popular countries were Morocco (20% placing in the top three, and 8% in first place), Nigeria (20% in top three, and 6% in first place), Egypt (15% top three and 5% first), and Kenya (15% top three and 4% first).
Ernst & Young expects Africa’s economy to grow by 4% for 2013 and 4.6% for 2014. According to Sita, there is a strong probability that a number of African economies will follow the same development paths that some of the Asian and other rapid-growth markets have over the past 30 years. He believes that by the 2040s, countries like Nigeria, Ghana, Angola, Egypt, Kenya, Ethiopia and South Africa will be considered among the growth powerhouses of the global economy.
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