Following the money : identifying the evolving nature of FDI trends in Africa

Abstract

Today’s global economic outlook is increasingly uncertain, and yields from investment in developed markets (DM) are in many instances negative. Africa may benefit from public and private sector capital inflows from investors hoping to offset the effects of diminishing yields from low growth regions. Globally, foreign direct investment (FDI) declined from USD 1.5 trillion in 2017 to USD 1.3 trillion in 2018, sinking for the third consecutive year. FDI flows to developed economies reached their lowest point since 2004, fell by 27 per cent, while FDI flows to developing countries remained stable. However, with global companies seeking to expand their presence in Africa, FDI flows to the region increased 11% year-on-year to USD 46 billion, while FDI to Sub-Saharan Africa (SSA) climbed 13% year-on-year to USD 32 billion.This trend reverses two consecutive years of contraction in inward FDI flows to the continent and coincides with rising trade tensions in developed markets. Even as trade relations around the world unravel – notably between the US and China, and between the UK and the rest of the Eurozone – Africa is set to move in the opposite direction following signing of the African Continental Free Trade Area (AcFTA).