East Africa attracts more investors as rest of continent suffer

On-going railway construction works in Kenya. East Africa received more Foreign Direct Investment in 2015 compared to the previous year, even as the rest of the continent attracted less foreign investment. PHOTO | FILE 

By Jean Pierre Afadhali

The Foreign Direct Investment, FDI, to East Africa grew last year despite an overall drop across Africa from $87 billion to $66.5 billion.

A new report by Analyse Africa, a data service of the Financial Times shows 705 projects were supported by foreign investors across the continent in 2015 with infrastructure taking about 44 per cent of the inflows. The three East African counties were joint tenth in the continent with regard to attracting investments.

In the period, Kenya saw one of the biggest increases with projects increasing by a half from 57 to 85. The projects had a value of $ 2.4 billion.

Up to 44 per cent of the investors targeted infrastructure related areas including power, construction and ICT.

Trends

“This clearly demonstrates that foreign investors are thinking long term about Africa’s prospects,” said Ms.Adriene Klasa who edited the report.

According to Ms Klasa, FDI decline in value does not mean the continent is in free fall. "While some larger economies are struggling disproportionally dragging down the region average, smaller players are stable and growing a steady clip,” she said

Tanzania, Senegal and Cote d’Ivoire are cited among economies that are stable.

According to The Africa investment report, Coal, oil and natural gas were the top sector by capital investment in 2015, accounting for $ 15.7 billion (24 per cent) of announced investment.

Extraction tops business activity by investment accounting 23 per cent of FDI, says the new report.

Companies totalling 495 invested on the continent, an increase of 6 per cent on 2014.

FDI into Africa accounted of only 8 per cent of global FDI in 2015, with project numbers accounting 4 per cent.

According to the report, regional investment trends show that Egypt remains the leader in FDI into Africa in 2015, with $14.5 billion of announced investment recorded.

South Africa dominates by projects number, recording 118 projects.

Destined for the continent

The top 10 destination countries for FDI into Africa accounts for 77 per cent and 75 per cent in the whole region by both numbers of projects and capital investment respectively.

However, Ethiopia and Mozambique are the only two countries in top 10 FDI destinations that recorded the decline in the number of projects in 2015.
Western Europe was the leading source of FDI into Africa for capital investment with projects valuated at $ 30.1 billion.

The region investments were decreased 38 per cent on the 2014 figure, but Europe achieved a 45 per cent per market share.

Its rival, The United States was the top source country for FDI investment into Africa despite a decline of 4 per cent in projects numbers.

However, the value of its projects dropped 12 per cent to$ 6.8 billion.

The UK was the second prolific investor, helped by a nearly 50 per cent increase in the number of FDI projects on the 2014 figures to 76.
Capital investment from UK also increased 93 per cent increase.

Italy was the top investor by capital investment with project valued at $ 7.4 billion

According to the report, of top 10 source countries for FDI into Africa, all but two achieved an increase in the number of projects destined for the continent.

Free fall

Asian countries invested in 11 per cent more African FDI projects in 2015.

Key investors were India and China with India accounting 5 per cent market share of all inward FDI projects.

The report states” despite China ranking 9th by capital investment and 7th by project numbers it was the second most prolific job creators.”

China, the world largest economy by GDP created 14,127 jobs across Africa in 2015.

The business activities that attracted most FDI on the continent are business services, sales, marketing support plus manufacturing.
That is not to say the region is in free fall; while capital investment decreased by 24 per cent to $66.5bn in 2015, the number of FDI projects increased by 6 per cent to 705.
In total, 495 companies invested in the region, an increase of 6 per cent on 2014, extraction was the top business activity by capital investment, accounting for 23 per cent of FDI.

South Africa continues to dominate FDI by number of projects, recording 118 projects