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AfricaMoney | August 20, 2017

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Foreign funding: Africa to see FDI inflows rise to USD 80 billion in 2014

Foreign funding: Africa to see FDI inflows rise to USD 80 billion in 2014

The manufacturing and service sectors will continue to attract a big share of the foreign direct investments into Africa, expected to fetch as much as USD 67.1 billion this year, according to the African Economic Outlook 2014. (Image: AfDB)

In what signals the final death knell to the global financial crisis and its aftereffects, the African Development Bank (AfDB) has forecast that foreign direct investment to Africa will rise to a towering USD 80 billion this year, up 42.8% from USD 56 billion in 2013.

Also, according to the “African Economic Outlook” report made public at the AfDB meetings in Kigali, the manufacturing and service sectors will continue to attract a big share of the foreign direct investments into Africa, expected to fetch as much as USD 67.1 billion this year.

While emerging nations are increasingly investing in the rising continent, the US, the UK and France still lead the foray, with the biggest share of Africa investments in 2012, the latest available data, totaling USD 178.2 billion across the three countries.

On the other hand, the BRICS nations, comprising Brazil, Russia, India, China and South Africa, collectively held investments valued at USD 67.7 billion, of which USD 27.7 billion came from China.

But, even as foreign aid as a proportion of total foreign capital inflows to Africa was set to decline to about 26% in 2014 from 30% the year before, the report noted that international aid will continue to rise this year, to about $55 billion. More unfortunately, the poorest African nations would continue to rely on it for survival reasons.

The survey compiled by the AfDB, the United Nations Development Program and the Organization for Economic Cooperation and Development also showed that foreign-investor interest in the continent is concentrated in a handful of countries.

“The top six recipients, representing one-third of the continent’s population, received the same amount of foreign direct investment as the remaining 48 countries together,” the report said, for last year.

Needless to say, the top destinations for investors continued to be the continent’s two largest economies, South Africa and Nigeria, with respectively an estimated USD 6.4 billion and USD 6.3 billion. Mozambique (USD 4.7 billion), Morocco (USD 4.3 billion), Ghana (USD 3.3 billion) and Sudan (USD 2.9 billion) close the list.

But, in a positive move, only 65% of the total FDI attracted by Africa in 2013 was cornered by resource-rich countries compared with 78% in 2008, as investors showed increasing interest in countries without natural resources that presented attractive opportunities in other industries such as manufacturing and services.

Besides, in a rising self-sufficiency wave, African investors continued to boost their presence on the continent.

Investors from the continent represented 18% of total investment in new projects in 2012, up from 7% in 2007. Also, investors from the continent zoomed in on financial services, construction and communication projects, unlike foreign counterparts who appeared to be focusing on mining projects.

However, development is uneven across the continent, with East and West African regional economies are set to grow significantly faster than other regions even as economic output for the whole continent is expected to grow by 4.3% this year and 5.7% in 2015.

Strike-afflicted and weighed down by the slowdown in developed economies, the South African economy is imposing a drag on Sub-Saharan African growth, the report said. Sub-Saharan African economies will grow by 5.8% this year and by 5.9% next year, but the rate is a full percentage point higher if South Africa is excluded from the calculation, the report said, noting that Africa’s second largest economy would grow only 2.7% in 2014 and 3% in 2015.

Meanwhile, Nigeria’s economic growth will slow slightly, to 7.2% in 2014 and 7.1% in 2015, from 7.3% last year, the report said, citing oil theft, poor oil exploration and heightened turmoil in the country’s northeast as dampers for economic growth.

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