Africa an investment gold mine
Foreign direct investment into Africa has grown by 87% in the past seven years, and all signs point to ongoing growth, says Ernst & Young.
s first Africa Attractiveness Survey looked at direct investment into Africa and questioned 562 global executives on how and where investment will take place in the next decade.
It found there has been an increase in the number of inward foreign direct investment (FDI) projects from 338 new projects to the continent in 2003 to 633 in 2010 (an increase of 87%).
The report says despite a drop in investment in the last couple of years following a peak in 2008, Africa has remained an attractive investment destination throughout the global downturn and has managed to maintain its relative share of global investment flows as a result. Strong growth in new projects into Africa is expected from next year with FDI inflows forecast to reach USD150 billion by 2015. Besides the critical importance of capital, which can continue to be reinvested in infrastructure, and other long-term developmental initiatives, this will create a number of the other direct and indirect benefits. Not least among these will be job creation; in 2015 alone, the estimated number of jobs created will be over 350,000.
When it comes to future investment strategies Africa is high on the agenda of global investors, with 42% of the businesses surveyed considering investing further in the region and an additional 19% of executives confirming they will maintain their operations on the continent. Those companies that have invested and already integrated Africa into their overall investment strategy are particularly positive.
Ajen Sita, Managing Partner: Africa at Ernst & Young says, “ FDI has a particularly important role to play as a future source of longer term capital for reinvestment in infrastructure initiatives and as an accelerator of sustainable growth across Africa. And there is far more to come. Although the African share of global FDI has grown over the past decade, we believe that it does not reflect the increasing attractiveness of a region that has one of the fastest economic growth rates and highest returns on investment in the world.”
Emerging markets are particularly interested in Africa as an investment prospect, says the report.. Over the last decade investment from emerging markets into Africa has increased rapidly from 100 new projects in 2003 to 240 in 2010 (representing an annual growth of 13% per year). Emerging markets investment now comprises 38% of the total into Africa; up from 30% in 2003.
This is confirmed by our survey of leading global businesses with 74% of emerging market investors surveyed saying that Africa has become a more attractive investment destination over the last three years. They are also increasingly positive about Africa’ s long term investment potential.
Mark Otty, Area Managing Partner Ernst & Young Europe, Middle East, India and Africa comments, “ There has been a fundamental shift in the global economy over the past few years, with emerging markets not only dominating investor attention and capital flows, but also playing an increasingly strategic role in defining the global economic agenda.”
Developed regions such as Europe and North America are more ambivalent.
Ernst & Young says the large majority of respondents view the extractive industries as a major area of investment perceiving it to be the sector with the greatest growth potential over the next few years. However, a more diverse range of sectors are now beginning to emerge as attractive investment options, with tourism (15%), consumer products (15%), construction (14%), telecommunications (13%) and financial services (9%) featuring strongly as offering high growth potential among respondents.
The African growth story in the last decade is underpinned by a longer term process of economic and regulatory reform that has occurred across much of the continent since the end of the Cold War.
Analysis of the projects shows that that investment success stories are spread across the Continent. Ten African countries attracted 70% of the new FDI projects in Africa between 2003 and 2010 (South Africa, Egypt, Morocco, Algeria, Tunisia, Nigeria, Angola, Kenya, Libya, Ghana).