In 2021, foreign direct investment (FDI) to African countries reached a record high of $83 billion, according to the latest World Investment Report 2022 from the United Nations Conference on Trade and Development (UNCTAD) published on 9 June.
The report states this is more than double the total recorded in 2020, as the Covid-19 pandemic weighed heavily on investment flows to the continent. Despite this strong growth, investment flows to Africa accounted for only 5.2% of global FDI, compared to 4.1% in 2020.
Most African countries experienced a moderate increase in FDI in 2021. In terms of sub-regions, the report notes that Southern Africa, East Africa and West Africa have seen their investment flows increase. At the same time, those in Central Africa remained stable and in North Africa - recorded a decline.
According to UNCTAD, the largest holders of foreign assets in Africa remained European, led by investors from the United Kingdom ($65 billion) and France ($60 billion).
FDI to Southern Africa increased almost tenfold to reach $42 billion. This substantial increase is mainly due to a significant corporate reconfiguration in South Africa. New projects announced in the country include a $4.6 billion clean energy project financing sponsored by UK-based Hive Energy and a $1 billion greenfield investment project by US-based Vantage.
Investment flows to Mozambique increased by 68% to $5.1 billion. The country has seen a jump in new investment projects, notably that of the British company Globeleq Generation to build power plants for 2 billion dollars. Meanwhile, investment flows to Zambia remained negative at -$457 million, a sharp drop from -$173 million in 2020.
Nigeria, the top recipient of FDI in West Africa, saw its inflows double to $4.8 billion, mainly due to a recovery in investment in the oil and gas sectors, the UNCTAD report says. International project finance deals in the country jumped to $7 billion. These include the project to build an industrial complex in the seaport of Escravos, worth $2.9 billion.
Projects in the extractive industries also helped boost FDI in Ghana to $2.6 billion, a 39% increase from 2020.
Senegal also saw a notable 21% increase in FDI, which reached $2.2 billion. The country recorded a 27% increase in new investment projects announced.
Ethiopia, the central hub of China's "Belt and Road" initiative, saw FDI flows increase by 79% to $4.3 billion in 2021. Four out of five international projects are for renewable energy, UNCTAD reports.
Other notable increases were reported by Uganda (31% to $1.1 billion) and Tanzania (35% to $922 million), which saw new investment project announcements triple in 2021.
While investment flows to Central Africa remained stable, the report indicates that FDI to the Democratic Republic of Congo increased by 14% to reach $1.9 billion. Investment trends remained mainly positive due to flows to offshore oil fields and mines.
Investment flows to Congo fell 8% to $3.7 billion, but two international project finance deals were announced in the country. The most critical is the construction of an oil installation for 166 million dollars.
FDI to North Africa decreased by 5% to $9.3 billion in 2021.
Investment flows to Morocco increased by 52% to $2.2 billion in 2021, while Egypt saw its FDI drop by 12% to $5.1 billion. Despite this decline, Egypt is Africa's second largest recipient of FDI.
Gulf states pledge to invest around $22 billion in various economic sectors in Egypt that could boost FDI in the future. Meanwhile, greenfield projects announced in the country more than tripled to $5.6 billion last year.
Despite the overall positive FDI trend on the continent, total new project announcements remained low at $39 billion, showing only a modest recovery from the $32 billion recorded in 2020 – and well below the $77 billion recorded in 2019.
At the same time, the number of international renewable energy projects in Africa soared to 71 – nearly double the 36 recorded in 2011. Among these is a $20 billion project that aims for Morocco to supply solar and wind power to the UK via 3,800 km of submarine cables.
The African continent has great potential to attract international investment in the economies. The challenge is to improve the business climate further and build Africa's capacity to maintain these sustainable investments.
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