Foreign Investments in Africa
Foreign Investment in Africa Seen at Record $80 Billion in 2014, Report Shows African Economy to Grow by 4.3% in 2014, 5.7% in 2015
articleBody16u By Matina Stevis
The Wall Street Journal Matina.Stevis@wsj.com
Updated May 19, 2014 10:15 p.m. ET [if ! lte IE 8]
BRUSSELS—Foreign investment in African economies will reach a record $80 billion in 2014, as business leaders in developed economies put the recession behind them and Chinese and others from emerging markets continue to show a strong interest in African assets, a report said on Monday.
The U.S., the U.K. and France still lead the foray. The three countries combined held the biggest share of Africa investments in 2012—the latest available data—totaling $178.2 billion. The so-called Brics countries—Brazil, Russia, India, China and South Africa—collectively held investments valued at $67.7 billion, of which $27.7 billion were Chinese.
The in-depth survey was compiled by the African Development Bank, the United Nations Development Program and the Organization for Economic Cooperation and Development and launched in Kigali on Monday at the start of the ADB's annual meetings.
Nigeria's economic growth will slow slightly, to 7.2% in 2014 and 7.1% in 2015, from 7.3% last year, the report said. Oil theft and poor oil exploration stifle that industry's potential while heightened turmoil in the country's northeast is casting a shadow on its financial prospects.
The South African economy—overtaken in April by Nigeria's as the biggest on the continent—will grow 2.7% in 2014 and 3% in 2015. South Africa's economy—hit by strikes and affected by the slowdown in developed economies—is a drag on sub-Saharan African growth, the report said. The concern echoed the International Monetary Fund's findings presented in April. Sub-Saharan African economies will grow by 5.8% this year and by 5.9% next year, but the rate is a full percentage point higher if South Africa is excluded from the calculation.
Economic output for the whole of the continent is expected to grow by 4.3% this year and 5.7% in 2015, but East and West African regional economies are set to grow significantly faster than other regions.
Overall, the continent's economic growth has been outpacing the world's, but it is very uneven among countries and regions, the report found.
A combination of foreign direct investment, portfolio investment in stock and debt, growing remittances from workers sending money home and improved tax revenue has meant the continent's overall dependence on foreign aid will continue to shrink as a proportion of its external financing, the report showed. Foreign aid as a proportion of total foreign capital inflows to Africa was set to decline to about 26% in 2014 from 30% the year before, the report said. But foreign aid will continue to increase this year, to about $55 billion, and the poorest African nations rely on it to survive.
African investors also continued to boost their presence on the continent, representing 18% of total investment in new—or "greenfield"—projects in 2012, up from 7% in 2007. Unlike their foreign counterparts, who directed most of their attention to the mining sector, Investors from the continent preferred financial services, construction and communication projects.
While most of the overseas private capital was lured by resource-rich African states, the report noted ever-more manufacturing and services projects are represented in the mix. Of the total foreign direct investment in 2013, 65% flowed to resource-rich countries, compared with 78% in 2008, as money was increasingly directed to countries without natural resources that presented attractive opportunities in other industries.
Foreign-investor interest remains fixed on a handful of African nations, however. Last year, "the top six recipients, representing one-third of the continent's population, received the same amount of foreign direct investment as the remaining 48 countries together," the report said. The top destinations were the continent's two largest economies, South Africa and Nigeria. [if ! lte IE 8]
