NAIROBI, Kenya, Jan 14 – Increased interest in sub-Saharan Africa as an investment destination continues to drive foreign direct inflows, with the region having attracted Sh2.5 trillion ($32billion) last year.
According to a World Bank report titled "Global Economic Prospects 2011", after declining by 12.3 percent in 2009, Foreign Direct Investment (FDI) which is the most important source of private capital flows to sub-Saharan Africa recovered by 6 percent in 2010 and it is expected to increase to Sh3.2 trillion ($40.8 billion) this year.
While 40 percent of this investment went to South Africa, Angola and Nigeria, small economies managed to attract over 50 percent of FDI which is a shift from tradition where 90 percent went to the region\’s largest economies.
"Supported by the rise in metal and energy prices in recent years most of these flows went to the extractive industries sector. The manufacturing sector accounted for 41 percent of the total number of greenfield investment projects during 2003-2009,"the report indicated.
The services sector especially in telecommunications, transportation and banking services too was a major recipient.
"In June 2010, for instance, Bharti Airtel, an Indian company, completed the acquisition of Zain\’s mobile operations in Africa for $10.7 billion, one of the largest acquisitions in 2010," the Bank said.
And while a large chunk of FDI has traditionally come from the developed world, the study showed that developing countries are themselves becoming a source of this investment as indicated by the rise of their share of the flows within Africa.
Releasing the report via a video conference, the bank\’s manager of global macroeconomics Andrew Burns pointed out that the region\’s economy was on a strong growth path with the GDP expected to expand by 6.4 percent this year.
"The recovery in 2010 was bolstered by the external sector, through stronger export volumes, rising commodity prices, higher foreign direct investment and a recovery in tourism," Mr Burns said.
And speaking on the Kenyan economy which it projected could grow at 5.2 percent this year, the bank\’s lead economist for Kenya Wolfgang Fengler said the country should continue investing in infrastructure development.
This he said was particularly crucial at a time when it is not clear what impact the ongoing drought is going to have on the agricultural sector and in effect the economy.
Mr Fengler also cautioned that the country might have a higher fiscal deficit and in effect higher debt levels should it fail to achieve the ambitious revenue collection target of Sh777.3 billion in the next financial year.