NAIROBI, Kenya, Jul 25 – East Africa recorded the highest share of Foreign Direct Investment (FDI) across Africa, achieving 26.3 percent of total projects.
This is according to Ernst & Young’s (EY) 2016 Africa attractiveness program which further states that Foreign Direct Investment project numbers in the continent increased by 7 percent.
The Southern Africa region however remains the largest investment region on the continent, although projects were down 11.6 percent from 2014 levels, while North Africa experienced 8.5 percent year-on-year growth in FDI projects.
The West Africa region on the other hand saw a rebound in FDI projects by 16.2 percent to become the leading recipient of capital investment on the continent, outpacing Southern Africa.
According to Ernst & Young’s Africa Business Centre Leader Michael Labour, despite the concerns about economic and political risk across the continent, FDI flows remain robust, and in line with levels seen over the past five years.
“A key factor here is the structural shift in FDI – from a high concentration of source countries and destination markets and sectors, to a far more diverse FDI landscape. As a result, risks and opportunities are being spread much wider, and there is no longer an overdependence on a limited group of investors or sectors to drive FDI performance,” he explained.
“Despite a relative slow down, sub-Saharan Africa remains one of the fastest growing regions in the world. This is reflected in the Foreign Direct Investment levels in 2015, where FDI project numbers increased by seven percent. Although, the capital value of projects was down year-on-year – from US$88.5 billion (Sh8.9 trillion) in 2014 to US$71.3b (Sh7.2 trillion) in 2015 – this was still higher than the 2010-2014 average of US$68b (Sh6.8 trillion),” reads the study.
As far as what sectors Foreign Direct Investment is now being directed into, the study says consumer products and retail, financial services and technology, media and telecommunications, accounted for 44.7 percent.
This is a shift from sectors previously focused on sectors such as mining and metals, coal, oil and natural gas.
“In 2015, further evidence of sector diversification came through with business services, automotive, clean-tech and life sciences all rising in significance and becoming the likely “next wave” for investors,” says the study.
The driving force for the change has been entering new markets, capturing market share and driving revenue growth. Further, a combination of factors which includes tightening economic conditions, increasingly well-informed consumers and citizens and intensifying competition among others, is now driving a change in focus toward striking a greater balance between growth, profitability and risk management.
The US retained its position in 2015, as the largest investor in the continent, with 96 investment projects valued at US$6.9 billion. During 2015, traditional investors such as the UK and France, as well as the UAE and India, also showed renewed interest in Africa.