Foreign investors still upbeat on Africa despite uncertainty
June 2—EY, the international financial services firm, says although Africa attracted 676 foreign direct investment (FDI) projects during 2016, which was down 12.3% from the previous year, the flow of FDI recovered after a dip in 2015.
In 2016, capital investment into Africa rose 31.9% and investment per project averaged $139 million, against $92.5 million in 2015.
The EY Africa Attractiveness Index 2017 country ranking puts Uganda at sixth among the top 10, below Morocco, Kenya, South Africa, Ghana and Tanzania, but above Cote d” Ivoire, Mauritius, Senegal and Botswana.
EY says these FDI projects created 129,150 jobs across the continent, a decline of 13.1% from 2015. However the firm, Ernst & Young, is optimistic. It says by 2030 Africa remains on track to be a $3 trillion economy, but this will require accelerating diversification initiatives and boosting resilience to external shocks.
EY believes East Africa remains the most buoyant region with the four key economies (Kenya, Ethiopia, Tanzania, and Uganda) all poised for growth of 6%+ for the rest of the decade.
Most of the foreign money flowing into Africa went to capital intensive projects in the real estate, hospitality and construction (RHC), and transport and logistics sectors. The continent’s share of global FDI capital flows increased to 11.4%, up from 9.4% in 2015. That made Africa the second fastest growing destination when measured by FDI capital.
‘This somewhat mixed picture is not surprising to us. We believe that investor sentiment toward Africa is likely to remain somewhat softer over the next few years. From our point of view, this has far less to do with Africa’s fundamentals than it does with a world characterised by heightened geopolitical uncertainty and greater risk aversion,’ the EY report states.
It continues that companies already doing business in Africa will continue to invest, but will probably exercise a greater degree of caution and be more discerning.
‘We are still of the opinion that any shorter term shifts in FDI levels will be cyclical rather than structural. We also anticipate that the evolution of FDI — increasing diversification in terms of sources, destinations and sectors — will continue. Over the longer-term, as economic recovery slowly gathers pace and as many African economies continue to mature, we also anticipate that levels of FDI will remain robust and will continue to grow,’ it reads in part.