Foreign direct investment (FDI) inflows to Africa rose by 4% to $57 billion in 2013, driven by international and regional market-seeking and infrastructure. In Southern Africa, flows almost doubled to $13 billion, mainly due to record-high flows to South Africa and Mozambique. This is according to the new “World Investment Report 2014” released by the United Nations.
The overall increase was driven by the Eastern and Southern African sub-regions, as others saw falling investments. In both South Africa and Mozambique, infrastructure was the main attraction, with investments in the gas sector in Mozambique also playing a role.
In East Africa, FDI increased by 15% to $6.2 billion as a result of rising flows to Ethiopia and Kenya. The report found that Kenya is becoming a favoured business hub, not only for oil and gas exploration but also for manufacturing and transport.
FDI flows to North Africa decreased by 7% to $15 billion and Central and West Africa saw inflows decline to $8 billion and $14 billion, respectively, in part due to political and security uncertainties.
Intra-African investments are increasing, led by South African, Kenyan, and Nigerian TNCs.
Between 2009 and 2013, the share of announced cross-border greenfield investment projects originating from within Africa increased to 18%, from less than 10% in the preceding period, says the report.
Increasing intra-African FDI is in line with leaders’ efforts towards deeper regional integration. . However, for most sub-regional groupings, intra-group FDI represent only a small share of intra-African flows. Intra-group FDI only makes up a significant part of infra-Africa investment for the EAC and SADC regions, where is makes up approximately 50% and 90% respectively.
According to the report, this is largely due to investments in neighbouring countries of the dominant outward investing economies in these regional economic co-operation (REC) initiatives, South Africa and Kenya. RECs have thus so far been less effective for the promotion of intraregional investment than a wider African economic cooperation initiative could be.