Egypt, Nigeria, S/Africa top list of African countries with highest FDI

Egypt, Nigeria, South Africa, Mozambique amongst others lead the list of African countries that have attracted the highest foreign direct investments in the past ten years. According to data obtained from the World Bank, the top 10 countries received over $300 billion Net FDI between 2011 and 2020. 

According to the Organisation of Economic Co-operation and Development (OECD), FDI is an integral part of an open and effective international economic system and a major catalyst to a country’s development.

A cursory look at the data revealed that Egypt received the largest influx of FDI during the period, a total of $56.2 billion, closely followed by Africa’s largest economy, Nigeria, with net FDI inflows of $45.1 billion. 

South Africa, a major competitor for FDI inflows in Sub Saharan Africa attracted a sum of $41.3 billion during the ten-year period, Mozambique followed with $37.17 billion.

Others include Ghana ($32.5 billion), Morocco ($27.1 billion), Congo Republic ($21.4 billion), Ethiopia ($20.8 billion), Democratic Republic of Congo ($13.59 billion), and Algeria ($12.4 billion).

What happened in 2020?

A report on global investment trends by the United Nations Conference on Trade and Development shows that FDI flows to Africa declined by 18% to an estimated $38 billion in 2020, from $46 billion recorded in 2019.

• The downturn was attributed to the covid-19 pandemic, low prices, and demand for commodities during the year.

• However, Egypt maintained being the top recipient of FDI in Africa. Although it recorded a 39% decline, an estimated $9 billion in 2019 to $5.5 billion in 2020.

• Similarly, in the Sub-Saharan region, FDI inflows decreased by 11% to an estimated $28 billion. Nigeria’s FDI inflows dipped by 21.2% from $3.3 billion in 2019 to $2.6 billion in 2020.

• The reduction in direct investment was attributed to lower crude oil prices and the closure of oil development sites at the start of the pandemic due to movement restrictions.

• The report also stated that Senegal was among the few economies with higher inflows in 2020, recording a 39% increase to $1.5 billion, supported by increased investment in energy.

• Foreign Direct Investment to South Africa, however, almost halved to $2.5 billion in 2020 from $4.6 billion recorded in the previous year.

Economic impact

A cursory look at the GDP of the ten countries shows that seven of them recorded positive growth between 2011 and 2019, while three of them recorded contractions.

• According to data obtained from the World Bank, Ethiopia recorded the highest increase of 200.2% in its GDP from $31.95 billion in 2011 to $95.91 billion in 2019. The Congo Democratic Republic followed with 95.1% expansion from $25.84 billion to $50.4 billion in 2019, while Ghana recorded a growth of 70.28%.

• Egypt grew its GDP by 28.43% in the same period, Morocco by 18.1%, while Nigeria followed with a 10.65% increase.

• South Africa on the other hand, recorded a contraction of 15.61% during the period.

Africa’s FDI compared to other Continents

According to the report by UNCTAD, global FDI flows fell by as much as 42% in 2020 from about $1.5 trillion to an estimated $859 billion.

• According to the report the drop was mostly recorded in developed economies where FDI fell by as much as 69% to $229 billion.
• Developing economies where FDI is badly needed, recorded a 12% decline representing about 72% of a share of the global FDI.
• Most of the inflows went to China with about $163 billion, the largest recipient in 2020.
• India’s FDI of $57 billion was higher than the entire $38 billion attracted by African countries in 2020.

Outlook for 2021

The report, suggests that the FDI trend in 2021 is expected to remain weak, as projections point towards continued downward pressure.

It also asserts that risks related to the latest wave of the pandemic, the pace of rollout of vaccination and economic support packages, fragile macroeconomic situations in major emerging markets, and uncertainty about the global policy environment for investment will all continue to affect FDI in 2021.