By Abdul Rahman Suagibu –
NEW AFRICA BUSINESS NEWS, Freetown, Sierra Leone- In three consecutive years Foreign Direct Investment (FDI) is down the drain all over the world, but not in Africa.
Global money is banking on Africa growth, reduced barriers to cross border trade and affordable access to commodities.
From 2017 to 2018, global FDI fell from $1.5 million to $ 1.3 trillion, according to an analysis by the United Nations Conference on Trade and Development (UNCTAD). The conference released its 2019 World Investment Report this week showing that, global FDI not only hit its lowest level since the global financial crisis, but has also been on the decline for three consecutive years.
One region defied this trend. Africa, in 2018, $46 million worth of FDI flowed into Africa, an 11% increase compared to 2017. This is a notable exempla of the Africa continent. The African continent because, when a company or an individual makes an FDI, they are said to be establishing long term business interest in a foreign country. The expectation is that, they will not only invest money, but also time and soft assets (i.e. technology, expertise and training).
The African Continental Free Trade Agreement (AFCFTA) was signed into law in May and allows 52 African countries to buy and sell goods without tariffs, which will make them less expensive and therefore more appealing to African consumers.
“The AFCFTA agreement will bolster regional cooperation,” Mulhisa Kituyi, secretary- General of UNCTAD said. “Along with upbeat growth prospects, these bodies will for FDI flows to the continent”.
Commodities are the other big draw for global investors. According to UNCTAD, global money is now investing in African commodities such as gold in order to profit from expected price increase.
In 2017, France was the top foreign investor in Africa, followed by the Netherlands, the United Kingdom, and the United States. Critically, UNTCAD’S data shows that from 2013 to 2017, Chinese FDI in Africa grew 65%, only topped by the Netherlands for which FDI was up more than 200%.
Not all 55 countries on the continent benefited equally from FDI in 2018. Investment in Northern Africa jumped seven percent or $14 billion from the previous year. This increase in FDI helped to offset less investment in Egypt, which was down eight percent.
Despite the decline in FDI for Egypt, UNCTAD data shows that the country was still the largest recipient of FDI continent-wide.
Ethiopia brought in $3..3 billion worth of FDI and was the top destination in East Africa. Kenya another East African country, received $1.6bn worth of FDI.
The investment were mainly in manufacturing, hospitality, chemicals and the oil and gas sector.
“Many east African nations have become more open to investment”, James Zhan, the director of UNCTAD’S.
Investment and Enterprise Division and the author of the report, told Al Jazeera. Mauritius, for example, is now more welcome to outside investment”.
“Mauritius government is quite clear. They are shifting their priorities and have a strategy”, he said “Now, they are continuing to build the island as a business hub and more business services to East African countries”.
A new tax law that went into effect in the US in 2018 has encouraged corporations to pull their cash out of other developed markets such as Western Europe, according UNCTAD. This has led to a less of $557bn or 25% of FDI, the lowest level is 15 years.
For New Africa Business News Abdul Rahman Suagibu Reports, Africa Correspondent