Latest edition of the World Investment Report reveals decrease of investment in Africa

According to the latest edition of the UNCTAD World Investment Report 2023, Foreign Direct Investment (FDI) flows in Africa registered a 44 per cent decline with respect to 2021, falling back to the 2019 level of $45 billion. However, the report also admits that the strong growth of FDI in Africa in 2021 was “anomalous”, having been influenced by a single large intrafirm financial transaction that was concluded in South Africa in that year. If this transaction is excluded, the change in FDI flows to Africa in 2022, compared to 2021, would have increased by 7 per cent.

Looking at the type of investment, the report notes that the highest share went to energy (including renewable energy), gas supply, construction and extractive industries, followed by the information and communication sector, with the highest growth rates registered in Northern Africa and Eastern Africa. This confirms that investment in Africa still goes predominantly to natural resources and extractive industries, while investment in health, roads, water, education or agrifood is still low, as an article published on the IMF blog already stated two years ago.

With regard to agrifood systems – a sector where Africa has a high potential and whose development is so needed and important for food security in the continent - investment in this sector has been particularly low. Not only in Africa, but globally. FDI in agrifood systems, notes the report, is lower today than in 2015. This should suggest African governments that something more needs to be done to attract investment in this sector.

In this regard, Africa is an active reformer, UNCTAD points out. Most of governments have put in place investment frameworks and policy measures that facilitate FDI. Moreover, in February 2023, the African Continental Free Trade Area (AfCFTA) Investment Protocol was adopted by the Assembly of the African Union to harmonize conditions for promoting, facilitating and protecting intra-African investment over the entire continent. This protocol also includes provisions for promoting and facilitating renewable energy investment.

Finally, regarding the main sources of investment in Africa, the report reveals that European countries are at the top of the list, led by the United Kingdom, France  and the Netherlands.