Africa receives less foreign investment in 2010

Foreign direct investment (FDI) into Africa fell by 14% to US$50 billion during 2010, according to a recent report.

“Inflows to Africa, which peaked in 2008 driven by the resource boom, appear to continue the downward trend of the previous year. For the region as a whole . . . estimates show that FDI inflows fell by 14% to $50 billion in 2010, although there are significant regional variations,” the United Nations Conference on Trade and Development (UNCTAD) said in a report released this week.

FDI flows to North Africa stabilised during 2010, while inflows to South Africa dropped to barely a quarter of the 2009 level.

Compared to 2009 figures, preliminary estimates by UNCTAD indicate that Egypt experienced a 1.7% increase in FDI, while investment into South Africa and Nigeria dropped by 77.9% and 60.4% respectively.

Merger and acquisition (M&A) activity − sales of companies in the host economy to foreign transnational corporations − showed a better performance. “Cross-border M&As, mainly in extractive industries, registered an increase of 49%,” UNCTAD said.

Greenfield projects − normally the main mode of FDI in Africa − suffered a decline of about 10% in 2010.

“The rise of FDI from developing Asia and Latin America to Africa was not yet enough to compensate for the decline of FDI from developed countries which still account for the lion’s share of inward FDI flows to many African countries,” UNCTAD added.

Globally, inflows of FDI rose marginally by 1%, from $1,114 billion in 2009 to almost $1,122 billion in 2010.