Tracking FDI flows is not an accurate science and often limits itself to recording only the larger and more visible projects or acquisitions. However, the data at hand still allows us to visualize the major trends. During the past decade, an overwhelming majority of the Foreign Direct Investment (FDI) into Africa came from the Developed world.
In its latest issue, African Investor published research on FDI into Africa. Even though the data only covers the period of April and May 2010, it provides an interesting reality check on how the world sees this promising continent. The evidence of the data could herald an evolution in the trend of where FDI into Africa is coming from.
During these 2 months, there seems to have been a strong acceleration of FDI into Africa, with $16.99bn invested, compared to $13.67% in March and February. What really caught our attention was that the rankings of those who are investing strongly diverge from the long term trend.
More notably, during the period, investments from Asia shot upwards by a staggering $9.62bn from the $383.88m recorded in the 2 month before. Not surprisingly, the majority of this came from China, which increased its investment in Africa by a massive $7.79bn. Europe lost its crown as the largest investment originator, dropping its investment from $9.66bn $2.52bn. The Middle East is also taking positions in its neighbouring continent. The latter is good news as it only further supports our view of running African and Middle Eastern investments in tandem
The story of China’s massive investments in Africa has, in the mind of many, become a mainstream fact. The perception of this reality may well be exaggerated. As can be seen on the chart, Africa is still only a small proportion investment destination for this upcoming giant.
Nevertheless, if you judge by the proportion of FDI that was destined to Latin America, a case could be made that China has only begun to enter the African continent.
Where is the money going?
West Africa came out on top as the investment destination, receiving more than half the FDI levels in Africa over the period. Most investments came in the form of capex. This increase can mostly be attributed to Nigeria, which saw up to $7.09bn worth of investments. North Africa followed in second place, with $5.22bn in investments. East Africa received almost a quarter of the projects but only a fraction of the capex.
China regained its position as the top investor in Africa. The country entered into a number of projects in different countries across Africa, including a $2208m deal to build a cement manufacturing plant in South Africa and a $400m agreement to expand the Kariba Hydro Electricity Plant. Also worth noting is the activity of the United Arab Emirates (UAE), as it increased its investment into Africa to 2.24bn, up from a dismal $8.3m back in February and March. The Philippines and Bahrain renewed their interest in Africa, and invested a combined total of $948.6m
Another interesting development is that African countries, as a whole, increased their investment back into the continent by 25.2%. amongst this group, South Africa holds the title of largest investor in the continent, nearly doubling its investments. Also worth noting is an increased cross border assertiveness by Egypt.
In conclusion, Asia, Africa and the Middle East are continue to further integrate with each other, the new silk road is up and running. Watch this space!
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