Foreign investment in sub-Saharan Africa rose 13 per cent last year to Sh 3.2 trillion ($32 billion), bucking a global downward trend and reversing two years of decline, according to a United Nations report.
Development of new mining and oil projects, a new US development-finance institution and the ratification of an agreement to create a continent-wide free-trade area could further boost foreign direct investment (FDI) in 2019, it said.
Africa stands in sharp contrast to developed economies, which saw FDI inflows plunge 27 per cent to their lowest level since 2004, the United Nations Conference on Trade and Development wrote in its “World Investment Report”.
Some African countries fared better than others, however. The Southern Africa region performed the best, taking in FDI of nearly Sh420 billion ($4.2 billion), up from - Sh92.5 billion ($925 million) in 2017.
Foreign investment in South Africa more than doubled to Sh530 billion ($5.3 billion). President Cyril Ramaphosa is seeking to attract Sh10 trillion ($100 billion) in FDI to Africa’s most developed economy by 2023.
Though much of the South African jump came from intracompany loans, new investments included a Sh75 billion ($750 million) Beijing Automotive Group plant and a Sh18.6 billion ($186 million) wind farm being built by the Irish company Mainstream Renewable Energy.
By contrast, inward FDI to Nigeria, a major oil producer, plunged 43 per cent to Sh200 billion ($2 billion). Investors were put off by a dispute between the government and South African telecom giant MTN over repatriated profits.
Banks HSBC and UBS both closed representative offices there in 2018. That left Ghana, which is in the midst of an oil and gas boom and saw inflows of Sh300 billion ($3 billion), as West Africa’s leading destination for foreign investment. Italy’s Eni Group was behind Ghana’s largest greenfield investment project.
Ethiopia remained East Africa’s top recipient of FDI at Sh330 billion ($3.3 billion), despite an 18 per cent drop compared with the year before.
Kenya, Uganda and Tanzania all saw increases in FDI inflows. Foreign investment in Uganda jumped 67 per cent to a record Sh130 billion ($1.3 billion), boosted by the oil and gas development of a consortium that includes France’s Total, CNOOC of China and London-listed Tullow Oil.
The creation of the US International Development Finance Corporation could help support FDI inflows this year. A replacement for the Overseas Private Investment Corp, it will have a budget of Sh6 trillion ($60 billion) and a mandate to make equity investments.
“The ratification of the African Continental Free Trade Area Agreement could also have a positive effect on FDI, especially in the manufacturing and services sectors,” the report said.
The AfCFTA aims to eliminate tariffs between member states, creating a market of 1.2 billion people with a combined GDP of more than Sh220 trillion ($2.2 trillion.