New report shows Africa is defying the current slowdown in global foreign direct investment.
For the third year in a row, foreign direct investment (FDI) is down all over the world, but not in Africa.
Global money is banking on African growth, reduced barriers to cross-border trade and affordable access to commodities.
From 2017 to 2018, global FDI fell from $1.5 trillion to $1.3 trillion, according to an analysis by the United Nations Conference on Trade and Development (UNCTAD). The conference released its 2019 World Investment Report this week, showing that global FDI not only hit its lowest level
since the global financial crisis, but has also been on the decline for three consecutive years.
One region defied this trend: Africa. In 2018, roughly $46bn worth of FDI flowed into Africa, an 11 percent increase compared to 2017. This is significant for the continent because when a company or an individual makes an FDI, they are said to be establishing a long-term business interest in
a foreign country. The expectation is that they will not only invest money, but also time, and soft assets (i.e. technology, expertise and training).
The African Continental Free Trade Agreement (AfCFTA) was signed into law in May and allows 52 African countries to buy and sell goods without tariffs, which will make them less expensive and therefore more appealing to African consumers.
“The AfCFTA agreement will bolster regional cooperation,” Mukhisa Kituyi, secretary-general of UNCTAD said. “Along with upbeat growth prospects, this bodes well for FDI flows to the continent.”
Commodities are the other big draw for global investors. According to UNCTAD, global money is now investing in African commodities such as gold in order to profit from expected price increases.
