While many foreign firms are eyeing opportunities in Africa, African companies themselves are increasingly investing into other countries on the continent.

Intra-African investment into new projects increased by an average of 23% every year between 2003 and 2011, according to Ernst & Young’s 2012 Africa Attractiveness survey. Since 2007 this rate has accelerated to an average of 42% a year.

In 2011, intra-African investment accounted for 17% of all new projects on the continent.

This trend is being led by Kenya, Nigeria and South Africa. Over the last four years, investments from Kenya and Nigeria have grown at more rapid rates than from anywhere else in the world, at 77.8% and 73.2% respectively.

South African companies – such as supermarket group Shoprite, mobile network operator MTN and Standard Bank – have also expanded their African footprints. Total South African investment into the rest of the continent grew at a rate of 64.8% over the past four years.

The report says increasing levels of intra-African investment is “a critical but perhaps underappreciated element of the emerging African growth story”.

“The growing confidence, self belief and commitment by Africans are reflected in the substantial growth of intra-African investment,” Ernst & Young added.

Perception gap remains

Ernst & Young’s survey, based on interviews with over 500 business leaders from across the world, found that perceptions about Africa are improving. Sixty per cent of respondents noted that their perception of Africa as a place to do business has improved over the past three years, while 11% said their impression has deteriorated.

But it is not all good news. When comparing Africa to other parts of the world (both developed and emerging markets) the continent is viewed as relatively unattractive, comparable only to the former Soviet states as an investment destination.

However, the survey found that perceptions differ widely between those already doing business on the continent and those who are not. Companies that already have a presence on the continent are overwhelmingly positive, ranking only Asia as a more attractive investment destination. Those who have no operations on the continent consider Africa as by far the least attractive destination in the world, distorting the overall results.

“Despite growth and progress … a perception gap remains between those already doing business in Africa, who are believers in the emerging African growth story, and those who have not yet invested and continue to associate the continent primarily with instability, conflict and corruption,” says Mark Otty, Ernst & Young’s managing partner for Europe, Middle East, India and Africa. “As a result, and while foreign direct investment projects continue to grow strongly, Africa still lags behind most other regions in capturing the imagination of many international investors.”