Ernst & Young’s latest Africa Attractiveness Survey has highlighted the impressive turnaround in African economies following the dip experienced in 2014. Foreign Direct Investment (FDI) is seen as a major factor in the rising numbers, with 22 countries in the continent expected to grow by over 5%, exceeding the global average of 3%.
While Europe and African nations remain the largest contributors to FDI in Africa, reassurance over the comparative political stability in North Africa has encouraged investors from the Middle East, specifically the UAE, to reengage with the continent. American companies led the field, followed by South African firms, with the UAE coming in at number three.
FDI grew by 136% in 2014, to $128 billion and is credited with the creation of 188,400 jobs. North Africa is driving the impressive numbers, specifically Egypt and Morocco, now that the uncertainty surrounding the events of the Arab Spring appears to have subsided. North Africa benefited from 22.2% additional FDI projects in comparison to 2013 and drew in 51% of all African FDI, a substantial increase from the region’s share of just 19.1% in 2013. In addition to North Africa, Mozambique and Ethiopia also benefited from growing FDI interest.
Of particular interest in the report was how the overall number of investments fell, while the value of single investments rose, due to the creation of ‘mega projects’. Greenfield FDI projects fell by 3.1% on a global level, but dropped by 8.4% in Africa. However, while there were fewer investments made, the value of each investment rose and capital investment increased due to a series of ‘mega deals’, with the average level of investment increasing from $67.8 million in 2013 to $174.5 million, the highest levels in five years.
Whether these numbers are sustainable is in question, according to Ernst & Young, however a meeting between the leaders of three African Economic blocs are currently meeting in Egypt to work toward the creation of a free trade agreement that could lead to the development of a common African market. The deal between the East African Community, Southern African Development Community and the Common Market for Eastern and Southern Africa could lead to the creation of a market of 26 countries with a population of 625 million and gross domestic product worth more than $1 trillion, which would be sure to prove an attractive proposition to foreign investors.
