Flows of foreign direct investment (FDI) to Africa fell by 9 per cent in 2010, UNCTAD’s annual investment survey reports.
The World Investment Report 2011 (WIR11) says total FDI inflows to Africa for the year came to $55 billon, or 10 per cent of total FDI inflows to developing countries. Africa’s share among developing countries declined from 12 per cent in 2009. FDI to Africa’s primary sector, especially the oil industry, continued to dominate FDI flows to the continent.
WIR11, subtitled “Non-equity modes of international production and development”, was released today.
Among the continent’s subregions, FDI inflows to North Africa, which account for roughly one third of the total African FDI, fell for the second year running to $17 billion, but the rate of decline was much reduced and the picture uneven within the subregion. For example, inflows to the Libyan Arab Jamahiriya increased by over 40 per cent in 2010 to $3.8 billion, but this rebound seems to be short-lived, given the current political situation in the country.
FDI inflows also declined in the countries of West Africa – recipients of about one fifth ($11 billion) of the continent’s total flows. Regulatory concerns in the oil industry contributed to the 29 per cent fall in inflows to Nigeria, which still accounted for more than half of the inflows to the subregion. The emerging oil industry pulled inflows to Ghana and Niger to record levels, at $2.5 billion and $947 million, respectively.
In Central Africa and East Africa, inflows of FDI increased in 2010 to reach $8.0 billion and $3.7 billion, respectively. The portion going to the larger recipients in Central Africa (Chad, Congo, the Democratic Republic of the Congo, Equatorial Guinea, and Gabon) was mostly due to oil-related investments. The only significant instance of FDI in non-primary sectors was investment in telecommunications in the Democratic Republic of the Congo. East Africa’s increase was modest (2.5 per cent), as inflows to the subregion’s largest recipient, Madagascar, fell substantially (-19 per cent).
Inflows to Southern Africa decreased by 24 per cent to $15 billion, although the subregion accounted for more than one quarter of the African total. The second largest recipient in the subregion, South Africa , saw its inflows fall by over 70 per cent to $1.6 billion, a level amounting to only one sixth of the peak recorded in the country in 2008. Inflows to the continent’ largest recipient, Angola, also declined substantially. One of the problems Angola’s oil industry faces is that its oil production has exceeded the quota allocated by the Organization of the Petroleum Exporting Countries.
Judging by data on greenfield investments over the first four months of 2011, FDI inflows to North Africa are likely to decline, the report says. No major cross-border mergers and acquisitions (M&As) appear to have occurred over the first five months. While the continuing pursuit of natural resources, in particular by Asian transnational corporations, is likely to sustain FDI flows to sub-Saharan Africa in 2011, it could well be another challenging year for the continent as a whole, the report says.
Over the long term, investment flows with greater development impacts are likely to come from neighbouring countries, the report predicts. Although there is some evidence that intraregional FDI is beginning to emerge in non-natural-resource-related industries, intraregional FDI flows in Africa are still small, only $46 billion, or 5 per cent of total African FDI projects during 2003–2010 (table 1). Harmonization of Africa’s regional trade agreements and accelerated and closely coordinated planning with respect to FDI would help Africa reach its intraregional FDI potential, the report contends.
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