FOREIGN direct investment (FDI) to African countries hit a record $83bn in 2021, according to UNCTAD’s World Investment Report 2022 published on June 9.
This was more than double the amount reported in 2020, when the Covid-19 pandemic weighed heavily on investment flows to the continent.
Despite the strong growth, investment flows to Africa accounted for only 5.2 percent of global FDI, up from 4.1 percent in 2020.
While most Africa countries saw a moderate rise in FDI in 2021, around 45 percent of the total was due to an intrafirm financial transaction in South Africa.
‘If we exclude this transaction, the increase in FDI flows to Africa, while still positive, would be more in line with what we observed in other developing regions,’ said James Zhan, director of UNCTAD’s investment and enterprise division.
In terms of subregions, Southern Africa, East Africa and West Africa saw their investment flows rise while those to Central Africa remained flat and North Africa registered a decline.
The largest holders of foreign assets in Africa remained European, led by investors in the United Kingdom ($65bn) and France ($60bn).
FDI to Southern Africa increased almost tenfold to $42bn
The strong increase was due primarily to a large corporate reconfiguration in South Africa – a share exchange between Naspers and Prosus in the third quarter of 2021.
New project announcements in the country included a $4.6bn clean energy project finance deal sponsored by UK-based Hive Energy and a $1bn greenfield project by US-based Vantage Data Centres to build its first African campus.
Investment flows to Mozambique grew by 68 percent to $5.1bn. The country saw a jump in greenfield projects, including UK-based Globeleq Generation’s plan to build power plants for $2bn.
Meanwhile, investment flows to Zambia remained negative at -$457 million, a steep fall from -$173 million in 2020, due mostly to a $1.5bn copper mine divestment by Swiss-based Glencore to state-owned ZCCM Investments Holdings.
West Africa sees FDI increase by 48 percent to $14bn
Nigeria, West Africa’s largest recipient of FDI, saw its flows double to $4.8bn, mainly because of a resurgence in investments in the oil and gas sectors.
International project finance deals in the country jumped to $7bn. These included the $2.9bn Escravos Seaport project to construct an industrial complex.
Projects in extractive industries also helped push FDI to Ghana up to $2.6 billion – an increase of 39 percent compared with 2020.
Senegal also saw a notable 21 percent increase in FDI, which reached $2.2bn. The country registered a 27 percent rise in announced greenfield projects.
Investment flows to East Africa increased by 35 percent to $8.2bn
Ethiopia, a central hub for China’s Belt and Road Initiative, saw FDI flows rise by 79 percent to $4.3bn in 2021.
Four out of five international project finance announcements in the country were in renewables.
Other notable increases were reported by Uganda (31 percent to $1.1bn) and Tanzania (35 percent to $922 million), which saw new greenfield project announcements triple in 2021.
Central African FDI remained flat at $9.4 billion
While investment flows to Central Africa remained flat, FDI to the Democratic Republic of the Congo rose by 14 percent to $1.9bn, with investment trends remaining positive primarily because of flows to offshore oil fields and mining.
Investment flows to Congo fell by 8 percent to $3.7bn, but two international project finance deals were announced in the country. The largest involves the construction of an oil facility for $166 million.
FDI to North Africa declined by 5 percent to $9.3bn in 2021
Investment flows to Morocco rose by 52 percent to $2.2bn in 2021 while Egypt saw its FDI drop by 12 percent to $5.1bn. Despite the decline, Egypt was Africa’s second-largest FDI recipient.
Pledges from Gulf States to invest about $22bn in various economic sectors in Egypt may boost FDI going forward. Also, announced greenfield projects in the country more than tripled to $5.6bn last year.
Greenfield investments remained low but projects in renewables grew
Despite the overall positive FDI trend on the continent, total greenfield announcements remained low at $39bn, showing only a modest recovery from the $32bn recorded in 2020 – and way below the $77bn registered in 2019.
Meanwhile, the number of international projects in renewables in Africa climbed to 71 – nearly double the 36 recorded in 2011.
These include a $20bn project to provide solar and wind energy from Morocco to the United Kingdom via 3,800 km of sub-sea cables.
‘For long-term prospects, the African continent has great potential to attract international investment in the green and blue economies, as well as infrastructure,’ Zhan said.
‘A challenge is to further improve the investment climate and strengthen Africa’s capacity to absorb such sustainable investment.’