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AfricaMoney | November 6, 2016

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Africa by Numbers: Look before you invest

Africa by Numbers: Look before you invest

Foreign direct investment (FDI) into sub-Saharan Africa has grown at a compound rate of 22.3% between 2007 and 2012, according to a recent report by Ernst and Young (EY).

The Africa by numbers 2013 report goes on to state that for companies seeking to grow and investors seeking higher returns, the African growth story has stood out.

However, the study notes that Africa remains a complex and challenging environment in which to do business, and making well informed choices about which markets to enter and via which mode is crucial.

On FDI trends, the report states that Mauritius, along with South Africa, Kenya, Ghana, Nigeria, Botswana and Namibia, falls into the low risk and high reward category for investments.

The report notes that this category is clearly the most attractive one for investors, as it suggests a relatively stable business environment together with high potential for growth.

Also, in terms of the footprint of select retail and consumer majors – Nestle, Unilever, Pick n Pay, Nakumatt, Shoprite, Tiger Brands and Massmart – the report goes on to say  that Mauritius is well-placed to receive larger FDI inflows, as it has a relatively high concentration of big brands.

In this context, the report stresses that countries with strong presence of consumer facing and/or potential corporate clients are more attractive for investors.

However, FDI trends and company footprint are just two of the lenses used by the report to scrutinize investments into Africa. Besides, the in-depth report also uses four other parameters, (or ‘lenses’, as it calls them), to study investment patterns in Africa.

Language and geography proximity to South Africa, strong regional groupings, greater level of urbanization, and higher-quality infrastructure are the other pillars that are used as a framework for measuring an economy’s attractiveness from an investor perspective.

The report, the second edition of the Africa by Numbers report released first in November 2012, is a follow up to EY’s flagship Africa attractiveness report.

It profiles eight of the most popular investment destinations across different parts of the continent, assessing their top five investors for FDI, top performing sectors, FDI outlook, and providing a breakdown of active infrastructure projects.

The diverse group of countries, most of which have experienced strong compound growth in FDI projects over the past five years, are: Cameroon, Egypt, Ethiopia, Ghana, Kenya, Mozambique, Nigeria and South Africa.

EY Africa CEO Ajen Sita commented that the sheer size of the continent can prove daunting as different sets of rules, regulations, stakeholders and market dynamics exist across each of the continent’s 54 countries.

In this context, he noted that the report provides a useful and factual guide to support companies in shifting the emphasis from developing a growth strategy for Africa to accelerating the execution of that strategy.

Meanwhile, Michael Lalor, lead partner for the Africa Business Center at EY, stated that there has been strong growth in FDI projects into many parts of sub-Saharan Africa over the past five years.

This is indicative of the continent’s rising status as an investment destination, he concluded.

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