THE latest World Investment Report 2023 by the United Nations Conference on Trade and Development (UNCTAD) has unveiled a decline in foreign direct investment (FDI) flows to Africa. In 2022, FDI to the continent fell to $45bn from the record-setting $80bn achieved in 2021. These figures accounted for 3.5 percent of global FDI.
Despite the overall decline, the report highlights a significant increase in the number of greenfield project announcements, which rose by 39 percent to reach 766. Furthermore, six of the top 15 greenfield investment megaprojects, valued at over $10bn each, were announced in Africa.
In North Africa, Egypt experienced a substantial surge in FDI, more than doubling to $11bn. This growth was attributed to increased cross-border merger and acquisition (M&A) sales. The number of announced greenfield projects in the country also doubled to 161, while international project finance deals surged by two-thirds, reaching $24bn. In contrast, Morocco saw a slight decrease of 6 percent in FDI flows to $2.1bn.
West Africa presented a mixed picture, with Nigeria witnessing negative FDI flows of -$187 million due to equity divestments. However, announced greenfield projects in the country increased by 24 percent to $2 billion. Meanwhile, FDI flows to Senegal remained stable at $2.6bn, and Ghana experienced a 39 percent decline to $1.5bn.
In East Africa, Ethiopia’s FDI flows decreased by 14 percent to $3.7bn, despite remaining the second-largest recipient of FDI on the continent. Uganda, on the other hand, enjoyed a 39 percent increase to $1.5bn, driven by investments in extractive industries. Tanzania also experienced growth, with FDI increasing by 8 percent to $1.1bn.
Central Africa saw stagnation in FDI flows to the Democratic Republic of the Congo, remaining at $1.8bn. However, investments in offshore oil fields and mining sustained the inflow.
In Southern Africa, FDI flows returned to pre-peak levels seen in 2021, influenced by significant corporate reconfigurations in South Africa. FDI in South Africa amounted to $9bn, below the 2021 level but twice the average of the past decade. Cross-border M&A sales in the country reached $4.8bn, a substantial increase from $280 million in 2021. Meanwhile, Zambia experienced a rise in FDI to $116 million after two consecutive years of negative values.
The report, published on July 5, also reveals growth in FDI inflows in four regional economic groupings in Africa over the past five years. The Common Market for Eastern and Southern Africa experienced a 14 percent increase,
reaching $22bn, while the Southern African Development Community quadrupled to $10bn. The West African Economic and Monetary Union doubled to $5.2bn, and the East African Community recorded a 9 percent rise, reaching $3.8bn.
Despite the increase, intraregional in
vestment in Africa remained relatively small, comprising 15 percent of all announced greenfield projects and 2 percent in terms of value. However, African multinational enterprises predominantly invested within the continent, with three-quarters of their project value remaining in Africa.
The report further highlights the notable growth in greenfield projects related to energy and gas supply, which increased to $120bn in 2022 from $24bn in 2021. Construction and extractive industries also saw an increase in project values, amounting to $24bn and $21bn, respectively. The information and communication sector registered the highest number of projects.
In terms of FDI stock, European investors continue to be the largest holders, led by the United Kingdom ($60bn), France ($54bn), and the Netherlands ($54bn).
The UNCTAD report provides valuable insights into Africa’s FDI landscape, highlighting both challenges and opportunities for economic development and growth across the continent.
