May 03, 2012
FDI into Africa seen growing as investor confidence improvesBack
Africa|Ernst & Young|Projects|Africa|Asia|Brazil|China|France|India|Kenya|Nigeria|Russia|South Africa|United Arab Emirates|United Kingdom|United States|USD|Building Bridges|Gross Domestic Product|Ajen Sita|Infrastructure
© Reuse this
In its ‘Building bridges: the 2012 Africa attractiveness report', E&Y stated that 73% of the respondents said Africa’s attractiveness as a place to do business continued to improve, while 60% of those surveyed believed that the attractiveness increased in the past three years.
About 5% of the respondents felt that the continent’s attractiveness was deteriorating, while 11% perceived that Africa’s appeal had waned over the past three years.
Overall, the survey reflected growing confidence in Africa’s prospects, said E&Y managing partner for Africa Ajen Sita on Thursday.
The number of new foreign direct investment (FDI) projects in Africa increased 27% from 675 in 2010, to 857 in 2011. This was up from 339 new projects recorded in 2003.
Developed markets accounted for 66% of the overall projects and emerging markets were responsible for the remaining 34%. The survey found that the top investors into Africa included the US, France, the UK, India, and the United Arab Emirates. South Africa was listed as the sixth largest FDI investor, while Nigeria and Kenya were listed in the top 20.
E&Y forecast that the continent would experience a robust growth rate of between 4% and 5% a year for the next ten years, while FDI into Africa was expected to reach $150-billion by 2015.
Sita added that Africa’s economic output increased from a gross domestic product (GDP) of $516-billion in 1995, to a GDP of $1 855-billion in 2011. This was expected to reach $2 545-billion in 2016.
However, despite this growth, Africa only attracted 5.5% of global FDI projects in 2011.
The firm attributed this in part to a perception gap that remained between those investors with an established presence in Africa, who believed that only Asia represented a more attractive option, and those who have yet to invest, who perceived Africa in an “overwhelmingly” negative light.
“Despite high optimism, high growth and high returns, the perception gap still exists and the African continent as a whole still attracts fewer FDI projects than India, and far fewer than China,” he said, adding that there was work to be done by the private sector and governments in Africa to better articulate and “sell the growth story and investment opportunity” for foreign investors.
The survey revealed that, of the respondents with no presence in Africa, 87% and 82% cited political instability and corruption, respectively, as concerns, while 67% believed the ease of doing business was a significant factor for potential investors.
However, Sita pointed to the improving business environment. The World Bank’s ‘Ease of Doing Business’ rankings, ranked 16 African countries ahead of Brazil and 17 ahead of India, while Transparency Internationals ‘Corruption Perception Index’ found that 13 African countries ranked higher than India and 34 ranked higher than Russia.
“Perceptions that corruption is rampant across the continent, or that African countries are inherently more corrupt than other rapid-growth markets, do need to be challenged,” the survey stated.
Further, Sita said that 33% of the top 30 economies that improved the regulatory environment for business the most over the past five years were in sub-Saharan Africa and that Africa’s political progress, which had steadily improved over the past 20 years, mirrors economic growth.
Most African countries have transitioned, or were currently moving toward some form of participatory democracy, which had in turn decreased armed conflict in Africa, the survey further pointed out.
Sita also noted that significant improvements in trade agreements, regional integration and increased investment in infrastructure, would ‘push Africa into the top league’ of investment destinations.
Meanwhile, African countries were increasing the number of intra-Africa investments, with the number of FDI projects growing from 27 in 2003, to 145 in 2011, accounting for 17% of all new FDI projects on the continent.
“There has been a radical shift in mindset and positioning over the last decade, with Africans themselves increasingly leading from the front by providing African solutions to Africa challenges” he concluded.
Edited by: Mariaan Webb© Reuse this Comment Guidelines (150 word limit)
Other Construction News
Article contains comments
Recent Research Reports
Road and Rail 2014: A review of South Africa's road and rail infrastructure (PDF report)
Creamer Media’s Road and Rail 2014 report examines South Africa’s road and rail transport system, with particular focus on the size and state of the country’s road and rail network, the funding and maintenance of these respective networks, and the push to move...
Real Economy Year Book 2014 (PDF Report)
This edition drills down into the performance and outlook for a variety of sectors, including automotive, construction, electricity, transport, steel, water, coal, gold, iron-ore and platinum.
Real Economy Insight: Automotive 2014 (PDF Report)
This four-page brief covers key developments in the automotive industry over the past 12 months, including an overview of South Africa’s automotive market, trade figures, production and the policies influencing the sector.
Real Economy Insight: Construction 2014 (PDF Report)
This five-page brief covers key developments in the construction industry over the past 12 months. It provides an overview of the sector and includes details of employment in the sector, infrastructure and municipal spending, as well as insight into companies’...
Real Economy Insight: Electricity 2014 (PDF Report)
This five-page brief covers key developments in the electricity industry over the past 12 months, including details of State-owned power utility Eskom’s generation activities, funding and tariffs, independent power producers and prospects for the sector.
Real Economy Insight: Road and Rail 2014 (PDF Report)
This six-page brief covers key developments in the road and rail industries over the past 12 months, including details of South Africa’s road and rail network and prospects for both sectors.
This Week's Magazine
The Built Environment unit at the Council for Scientific and Industrial Research (CSIR) has developed a cost-competitive ultrathin concrete pavement surface that, for the upgrading of unpaved roads to paved roads, is more durable than many other pavement alternatives...
The Southern African Large Telescope (SALT), based at Sutherland in the Karoo region in the Northern Cape province, is promising to become an important instrument for research into dark matter. "SALT is shaping up to be very important for answering questions about...
The South African tool, die and mouldmaking (TDM) industry is being revitalised to locally produce the tools, dies, moulds and fixtures required by the manufacturing sector. Local TDM capability is key to enable the manufacturing industry to remain competitive, says...
Misfortune often finds its roots in the smallest of things. Such as a centimetre or two. Or is that in inch? Perhaps a foot? Swedish or Dutch? The French had reason to blush in May as it became apparent that national rail operator SNCF had ordered 2 000 trains that...
The repositioning of the Fibre Processing & Manufacturing Sector Education and Training Authority (FP&M Seta) and its business processes will ensure improved performance in reaching strategic targets and in providing customer service.