Keypoints:
- Africa’s FDI dropped 42% to $28bn in H1 2025
- North Africa saw steepest fall due to Egypt project
- Global FDI slid 3% amid economic headwinds
FOREIGN direct investment (FDI) flows to Africa fell sharply by 42 percent year-on-year to $28bn in the first half of 2025, according to the Global Investment Trends Monitor released on October 31 by the United Nations Trade and Development (UN Trade and Development), formerly known as UNCTAD.
The report reveals that Africa experienced the most significant contraction among developing regions, driven largely by a steep decline in North Africa. FDI inflows into the subregion totalled $11bn between January and June, compared with $27bn during the same period in 2024.
That earlier surge was largely linked to Egypt’s Ras El-Hekma megaproject, a landmark urban development backed by Abu Dhabi Developmental Holding Company, the sovereign wealth fund of Abu Dhabi. Without such large-scale transactions this year, investment flows fell sharply.
Sub-Saharan Africa also hit
Sub-Saharan Africa recorded a 23 percent year-on-year drop in FDI, attracting $17bn in the first half of 2025. Analysts say the region continues to face multiple structural barriers, including high financing costs and subdued investor confidence, despite stable commodity demand.
By contrast, other developing regions weathered the period relatively well. Latin America and the Caribbean saw a 12 percent increase in FDI inflows, while developing Asia recorded a 7% rise, highlighting Africa’s divergence from global trends.
Global slowdown and rising caution
Worldwide, FDI dipped by 3 percentto $737bn during the first six months of 2025. UN Trade and Development attributed the decline to persistent trade tensions, elevated interest rates, and geopolitical uncertainty, which have made investors more cautious.
Developed economies bore the brunt of the slowdown, with cross-border mergers and acquisitions—traditionally a key FDI driver—falling 18% to $173bn.
The report added that high borrowing costs and economic uncertainty have continued to suppress industrial and infrastructure investment globally. Greenfield project announcements fell 17%, with a notable 29% reduction in manufacturing sectors linked to global supply chains, including textiles, electronics, and automobiles.
SDG-related investment continues to decline
Sectors tied to the Sustainable Development Goals (SDGs) have also been affected. FDI in SDG-related sectors fell 10 percent in number and 7 percent in value in early 2025, following an even steeper fall the previous year.
Greenfield investments in infrastructure declined 31 percent in value and 25 percent in number, driven by sharp contractions in Latin America and the Caribbean. The value of infrastructure investments there plunged 78 percent, while project numbers fell 43 percent.
Water and sanitation projects suffered a 40 percent global decline, with no new projects launched in Africa or other least developed countries.
Agribusiness and healthcare were rare bright spots: agribusiness investment held steady across developing economies, while healthcare saw a 37 percent rise, reflecting sustained demand for health-related infrastructure and services.
Outlook remains uncertain
UN Trade and Development cautioned that the global investment climate is likely to remain challenging for the rest of 2025. It cited ongoing geopolitical tensions, regional conflicts, and efforts by multinational firms to reduce supply chain risks as key constraints.
However, the report noted some positive signs. Looser financial conditions, a pickup in mergers and acquisitions during the third quarter, and increased foreign spending by sovereign wealth funds could help support a modest recovery by year-end.
