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Africa: A Hub for Foreign Direct Investments
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Introduction
Through the previous three years, investment trends in Africa have taken a slight decline. Specifically, through 2015/2016, FDI flows have declined to 59 BN USD
in 2016 (with variance across the region). This was due to the low commodity prices from the 2008 shock and the recent oil crisis. However, by 2017, commodity prices have started to recover once again, after being led by
recovering oil prices
. As a result, an expected movement of increase in FDIs occurred throughout the continent. At this context, the report discusses the
upcoming and on-going FDI trends
across sectors, regions in Africa, and project funds.
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Question 1: What are the leading FDI regions in Africa?
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- African countries mostly face the same investment obstacles, particularly in political instability, regulatory uncertainty, mining industry, unemployment costs, systemic corruption and state of infrastructure.
- Due to the sustained growth that Sub-Saharan Africa has been witnessing, investor interest has increased over the years. Foreign Direct Investment projects grew at a compound rate of 19.5% by 2013.
- On the downside, in 2016, Africa attracted only 676 FDI projects which is 12.3% less from FDI projects in 2015. These projects allowed for 129,150 job creations, which is a decrease of 13.1% from 2015.
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Question 2: What are the recent project fund sources in Africa?
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Question 3: What are the recent investment developments?
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Question 4: What are the leading investment sectors in Africa?
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Question 5: What is the outlook for FDI in Africa?
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- The Expected GDP is estimated to increase by 4.1% in 2018 and 2019.
- The first priority for African governments is to encourage a shift towards labor-absorbing growth paths, while the second is to invest in human capital.
- The steady public investment in infrastructure continues as Africa's infrastructure investment requires to be 130-170 BN USD a year.
- East Africa remains the fastest growing region, with a growth of 5.1% in 2016 projected to grow by 5.4% and 5.8% in 2017 and 2018 respectively.
- The Northern region is expected to grow by 3.6% in 2018, with expected pick up of growth in Morocco of 3.9% in 2018.
- Libya is projected to stay in the negative growth territory in 2018 with a growth of -3.9%.
- West Africa is expected to record improvements in growth by 4% in 2018.
- Central Africa republic is expected to record improvements in growth in 2018 by 3.1%.
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Conclusion
Africa, in specific the central region, has started to recover economically due to the increase of commodity prices. The recovery was led by oil prices, where the price per barrel recovered to 63 USD per barrel
, in 2018. Domestic demand is the primary driving factor for this recovery. The continuing increase in commodity prices will eventually balance the budget deficit of many nations and act as a trigger for further FDIs across the region, witnessing an economic growth expected to be at
4.3%
in 2018.
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