Kenya, Uganda among top FDI recipients

Saturday May 24 2014

Sub-Saharan rising consumer class has encouraged investment in the region. Photo/Diana Ngila

Kenya and Uganda are among the top 10 recipients of new foreign direct investment (FDI) in sub-Saharan Africa, with Nairobi posting one of the fastest rates over the past seven years.

A report by UK-based consulting firm EY said that FDI in sub-Saharan Africa increased by 4.7 per cent in 2013, but investment was down in North Africa.

Ghana and Kenya featured in the top four positions, registering compound annual growth rates of more than 40 per cent each in FDI projects since 2007.

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The UK remains the lead investor in the continent, where 750 new projects in 2013 were started compared with 774 the year before. The report said there was a “significant movement” on the list of the top 10 countries by FDI projects in 2013.

Only South Africa and Nigeria retained their first and third positions from 2012, with 142 projects and 58 projects, respectively. However, FDI projects in both countries registered a slight decline. Kenya, with 68 projects (in second place), Ghana with 58 and Mozambique with 33, all moved up the ranks.


Zambia and Uganda were the new entrants on the top 10 list in 2013 with 25 and 21 projects respectively — an increase of more than 20 per cent. In contrast, North African countries such as Morocco, Tunisia (ranked eighth in 2012) and Egypt slipped in the rankings.

Africa’s cities are now emerging as the hotspots of economic and investment activity on the continent, the report says. Nearly 70 per cent of the respondents stressed the significance of cities and urban centres in their investment strategy in Africa.

The report also says that Africa’s attractiveness relative to other regions has improved significantly over the past few years. The overall survey results show that Africa has moved from third last position in 2011, to become the second-most attractive investment destination in the world behind North America.

“The good news in this year’s survey is that perceptions about the continent seem to be shifting,” said Ajen Sita, chief executive officer, EY Africa.

“For the first time, Africa is seen as the second most attractive investment destination in the world. It has strong fundamentals to encourage investment including steady democracy and macroeconomic growth; an improving business environment; rising consumer class; and abundant natural resources and infrastructure development.

Africa’s stronger investment attractiveness is best explained by its own sustained growth rates in the context of slower global growth. The continent’s growth prospects are likely to remain solid, as an urbanising and rising middle class drives demand for consumer products and improved services.”

EY, a UK-based multinational professional services organisation, also said that intra-African investment continues to rise steadily.

One of the key points the report makes is that investors are looking beyond the more established markets of South Africa, Nigeria and Kenya to expand their operations, as well as moving into more consumer-related sectors as Africa’s middle class expands.

“Africa’s share of global FDI projects has grown steadily over the past decade and it is a promising sign that investors are now looking across the continent and to new sectors. Further regional integration and infrastructure development should continue to entice investors to the exciting investment opportunities that Africa can offer,” said Mr Sita.

READ: Foreign investments in Africa have risen, but have Africans benefited?

Among international investors, the UK became the clear leader in 2013 with 104 projects, while the US fell from joint first place to second place with 78 projects, a 20 per cent decline from last year.

South Africa, the third largest investor, directed 63 investment projects into the rest of Africa, a 16 per cent decline on last year but a significant increase from pre-crisis levels when it registered on average 12 projects.

There was a sharp uptake in FDI projects by Spanish and Japanese companies with increases of 52 per cent and 77 per cent, respectively.

The report also found that intra-African investment is gaining momentum. African investors nearly tripled their share of FDI projects over the past decade, from eight per cent in 2003 to 22.8 per cent in 2013.