Investor interest in Africa set to rise in 2014: FDI Confidence Index
South Africa, in particular, set the tone for rising investor confidence, moving up two slots from 2013 to 13th place in 2014. (Image: Source Mauritius)
Africa bucked 2013’s lethargic trend with a 12% increase to $47.6 billion in foreign direct investment, broad-based across sectors, according to data from global consulting major AT Kearney’s report on FDI for 2014.
The growth in FDI directed towards the emerging continent was driven not only by increased interest in extractive industries, but manufacturing and services also saw a rise in investor interest.
South Africa, in particular, set the tone for rising investor confidence, moving up two slots from 2013 to 13th place in 2014. It received $4.5 billion in 2012, after a bounce of $5.8 billion in 2011.
In April 2013, British major BP announced it would invest $550 million in South Africa’s refinery, terminal and service station network over the next 5 years, while May 2013 saw Google made its first renewable energy deal in Africa with a $12 million solar energy investment in the Northern Cape province.
In this year’s ranking, the US not only maintains its first place position from last year, but also increases the lead it had in the 2013 study. The findings bode well for the global economy too: Nearly four out of five respondents are more optimistic about the global economy than they were a year ago.
Since its inception in 1998, the study has consistently pointed toward top global choices for foreign direct investment, with the top 10 most attractive FDI destinations receiving a majority share of global FDI inflows roughly one year after the survey.
In this year’s top 10, the United States and China maintained their positions as top two, with 39% of respondents voicing a more positive sentiment than last year for second-ranked China.
Meanwhile, Canada moved up one place to rank three while Brazil fell two places to five. The UK, amid discussions of a potential opt-out from the EU, rose four positions to fourth while Germany rose one place to rank six.
Australia and India both experienced a cooling off among investors, falling two places each to rank seven and eight respectively. Conversely, Singapore, with its famously predictable regulations and low corporate tax rate, moved up a notch in the ranking to ninth rank. Finally, France, currently under President Francois Hollande’s efforts to increase the country’s competitiveness, has reclaimed a place in the top ten.
Despite unresolved deficits in the euro zone, 11 European countries still rank in the top 25, some entering the ranking for the first time. Northern European nations Sweden and Denmark make it to the top 25 for the first time while Belgium and the Netherlands return to the index after some time off investors’ radars.
However, Russia, ranked 11 last year, fell off the top 25 ranking, despite the fact that the survey was fielded prior to the current political imbroglio in Ukraine. Overall, Europe continues to attract more than a quarter of the world’s total FDI inflows, due to its highly qualified labor force, sophisticated, well-heeled consumers, and world-class infrastructure.
Each region has an interesting unfolding story seen through the lens of the FDI Confidence Index, with many of the winners riding on stability after the ongoing post-recession economic turbulence. Asia, which attracts roughly a third of all foreign direct investment, has shown particular resilience; with China at the top of the investment ladder as it attracts higher-end manufacturing from overseas.
The AT Kearney Foreign Direct Investment Confidence Index, now in its 14th edition, examines overarching trends and ranks countries on how changes in their political, economic, and regulatory systems are likely to affect FDI inflows in the coming years. As in the past, this year’s index provides valuable insight into how business leaders regard the medium-term economic outlook.