Eastern Africa received the lowest foreign direct investment (FDI) in 2020 compared to its western and southern Africa counterparts, mostly due to policy bottlenecks and rising political tensions, like those in Ethiopia.
Kenya was the highest FDI recipient in the region and the fifth in Africa, attracting capital investments worth $500 million last year. This was a significant drop from the $2 billion it received in 2018.Tanzania was second, attracting $200 million while Uganda booked no foreign inflows in the year under review.
Southern Africa regained its lead as the largest FDI hub in Africa owing to its diversified economy, which has attracted investors.
Morocco and Egypt attracted most of the investment in the North while Nigeria, Ghana and Côte d’Ivoire dominated in the West. Angola took the lion’s share of FDI in Central Africa.
The “Africa Attractiveness Report 2021” by global auditing firm Ernst and Young also shows that FDI into Africa fell sharply by almost 50 percent in 2020 due to the Covid-19 pandemic, trailing all other emerging markets.
“Africa’s large resource-export-dependent economies felt the impact of commodity price declines and rapidly decreasing demand, particularly from China, causing them to fall into recession,” the report says.
Nigeria emerged the fastest-growing hub on the continent in terms of capital investments, attracting $6.6 billion, followed by South Africa ($3.8 billion), Angola ($3.1 billion) and Morocco with $2.4 billion in investments.
The report highlights that FDI focus is shifting away from extractive industries towards the services. Over the last five years, service-based sectors received a total of $158 billion as capital investment, amounting to 45 percent of what was allotted to all industry groups, while the extractives sector accounted for 31 percent of all inbound capital between 2016 and 2020.
The telecommunications service sector received the highest capital investment totalling around $8.5billion, with the largest investments focused on Nigeria and South Africa as remote working and hybrid work models raised the demand for transformative business solutions.