Increasing Investment in Africa – Business Daily

The study aims to support the implementation of the AfCFTA Protocol by providing insight into FDI dynamics, which is essential for integrating the Protocol into national and regional strategies. It also aims to generate a comprehensive understanding of FDI data, focusing on the main recipient countries, sources of intra- and extra-African investment, and the attraction of significant investments.

Furthermore, the organisation aims to promote sustainable development by facilitating intra-African investment, contributing to economic integration and ensuring a more equitable distribution of investment benefits across the continent.

Trade liberalisation under the AfCFTA is expected to increase foreign direct investment (FDI) inflows by lowering entry barriers and regulatory risks, thereby improving the overall investment environment.

Key findings on Foreign Direct Investment (FDI) in the context of the AfCFTA reveal several important observations. Domestically, FDI in Africa is concentrated in a limited number of countries, meaning that the benefits of such investment are uneven across the continent.

This concentration limits the potential for broader economic development in less advantaged countries to attract FDI. Ten African economies have emerged as key destinations for foreign direct investment (FDI), each offering distinct opportunities.

With a diversified economy and a strong financial services sector, South Africa has consistently attracted significant FDI. Egypt has emerged as a major player, particularly in energy, telecommunications and real estate. Ethiopia has seen significant growth in FDI, particularly in manufacturing and agriculture, driven by a push to industrialise.

As the continent’s largest economy, Nigeria continues to attract foreign direct investment, especially in the oil and gas sector, while also expanding in the telecommunications and technology sectors.

And Mozambique is also gaining attention for its natural gas reserves. Kenya is known for its technology sector, while Senegal is becoming increasingly attractive for its energy and mining sectors. While Tanzania attracts foreign direct investment in mining and tourism, Ghana is favored for oil, gas and agriculture, supported by a stable political climate.

These countries represent a mix of developed and emerging markets, with a growing trend towards diversifying investments beyond traditional commodity extraction, underlining Africa’s potential for sustainable economic growth.

However, the sectoral composition of incoming FDI is heavily skewed towards natural resources and has few links with other sectors of the economy.

This suggests an urgent need for African nations to attract a more diverse range of sectors to increase overall development. Highlighting the urgency and importance of this issue can make the audience feel the need to act immediately.

While there are signs of slight diversification, these changes are happening slowly.

Another finding is the difference between intra-Africa and extra-Africa FDI. The former focuses more on services such as communications, financial services and tourism, while the latter focuses mainly on natural resources and manufacturing.

This distinction suggests that promoting intra-African foreign direct investment may lead to a greater emphasis on non-traditional sectors, which may be beneficial for economic diversification.

Furthermore, trade liberalisation under the AfCFTA is expected to increase foreign direct investment (FDI) inflows by lowering entry barriers and regulatory risks, thereby improving the overall investment environment.

Implementation of the AfCFTA Protocol on Investment is expected to be crucial in helping countries attract foreign direct investment-oriented services sectors.

The programme also aims to promote a more equitable distribution of foreign direct investment among African countries.

This initiative can create a coherent framework for investment across Africa; the regulatory framework should be improved to simplify investment processes and protect investor rights in shaping the future FDI landscape on the continent. Investment promotion agencies should be well-equipped to attract investors.