|Title:||Africa foreign direct investment in dollars for 2000 to 2010|
Start of full article - but without data
FDI in Africa by year
Year FDI ($bn)
After two years of decline and disappointment, the rate of foreign direct investment (FDI) into Africa shows every sign of increasing. Companies from Brazil, China and South Asia are joining their North American and European counterparts in investing in the continent with the world's fastest-growing population. Moreover, while raw materials certainly entice many investors into Africa, banking, tourism and agricultural projects are beginning to awaken greater interest, suggesting that a larger proportion of the African population will soon benefit from an influx of investment. Report by Neil Ford.
There is little doubt that African economies have relied on FDI for too long. Relatively, far too little economic activity on the continent is carried out by African businesses and shockingly little trade occurs between African nations.
Nevertheless, direct investment by non-African companies certainly can have a massive impact on local economies. Firstly, greenfield FDI - where new operations are set up rather than existing companies taken over - can create large numbers of new jobs.
Secondly, the financial influx can build infrastructure, provide technological expertise and inject human capital, all of which can encourage associated African companies and operations to become more efficient. Finally, FDI can boost economic growth and generate more taxes, whether direct or indirect, to help fund national life, development and social welfare.
However, FDI does not have a uniform positive impact on every sector and every country. Tax holidays, poor regulation and the displacement of local communities can all reduce the positive contribution that foreign companies make to domestic economies.
In addition, the definition of FDI in Africa, as always, can be a little difficult to pin down. Chinese firm Sinopec took over Addax Petroleum of Canada for $Xbn and Bharti Airtel of Indian bought Zain's African operations for $XX.Xbn but much of this investment went to shareholders outside of the African continent. Nevertheless, both deals underline the attraction of African assets for Asia's biggest companies and, indeed, the Bharti Airtel purchase was the biggest ever South-South deal - where both the seller and buyer were based in emerging markets.
The difficulties of the past three years mask underlying changes in the distribution of global FDI. Over the past decade, about XX% of FDI went to the industrialised world, while the top five destinations for FDI over that period were the US, the UK, France, Canada and the Netherlands, in that order.
However, developing and emerging markets attracted more than XX% of global FDI flows for the first time in 2010, although much of this was targeted at the former Soviet Union and Asian economies.
It is worth remembering that Africa was enjoying a boom in FDI by historical standards prior to the crisis. As Table X on page XX demonstrates, investment in the continent increased from $XXbn in 2002 to $XXbn in 2008, helping in no small part to create the African economic renaissance.
FDI in Africa by year
Year FDI ($bn)
However, this figure fell to $XX.Xbn in 2009 and then to $XX.Xbn in 2010, at a time when other emerging markets were recovering. This represented an average decrease of XX% in a single year but the decline was not evenly spread across the continent.
FDI levels begin recovery
South Africa was particularly badly affected, with foreign direct investment falling from $X.Xbn in 2009 to $X.Xbn in 2010. This was partly because the country is more integrated in the global economy than most other parts of the continent, while European and North American investment funds cut their interests in developing markets across the globe.
FDI in North Africa also fell sharply in 2009, resulting in higher unemployment and contributing to the social tensions that resulted in the region's current instability.
However, the World Bank is confident that a combination of debt reduction and improvements in economic policy will result in more rapid economic growth in most parts of the continent. The World Bank Prospects for Development report for 2011 forecasts average annual economic growth for subSaharan Africa of just over X% for 2011 and 2012, partly on the back of recovering FDI levels in oil, gas and mining projects.
Sub-Saharan Africa's most populous nation, Nigeria, is also its biggest recipient of FDI, mainly in the oil and gas sector. Foreign investment in the country increased from $X.XXbn in 2001 to $XXbn in 2009, making it the XXth most popular destination for FDI in the world.
However, the growth generated by a booming oil industry also tends to attract FDI into non-oil sectors and the World Bank too is confident that foreign investors are beginning to look beyond extractive industries and into the wider African economy. The 2011 report stated: "Africa is also becoming an attractive destination for portfolio investment flows. Countries like Ethiopia, Ghana, Nigeria, and Rwanda are identified by several fund managers as possible destinations for Africa-centric investment funds."
The government of Uganda, for instance, expects non-oil sector FDI to increase from $X.XXbn in 2010 to $Xbn this year, as investors gear up for the commencement of commercial oil production in the country for the first time. According to figures from the Uganda
Investment Authority (UIA), XXX investment projects were licensed in the country last year, most prominently in the agricultural sector, creating an estimated XXX,XXX jobs in the process.
Maggie Kigozi, the executive director of the UIA, says: "We think the economic conditions in our traditional sources of foreign investment, mainly Europe, will improve significantly, which is underpinning our confidence. Most remarkable, however, is that we have new sources of investment like India, China and the Middle East and these are replacing Europe. So even if Europe remains sick, it won't affect us much."
Asia not yet on top