May 03, 2012
FDI into Africa seen growing as investor confidence improvesBack
Ernst & Young|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
© 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
Other Infrastructure News
Updated 1 hour 15 minutes ago Following consultations with low-income households in the HaMakuya district, in Limpopo, University of Johannesburg (UJ) Industrial Design Department head Chris Bradnum has designed a “safe, efficient and sustainable” stove, which reduces the volume of wood...
Updated 3 hours ago Two deals worth a combined R14.7-billion led by the Corporate and Investment Banking division of Barclays Africa have secured four top international awards. The banking firm was awarded Overall African Deal of the Year for 2013 as well as Africa Power Deal of the...
Updated 3 hours ago Passenger car imports could fall in 2014, after reaching an all-time high in 2013, at 337 000 units. Imports made up 9% of all passenger cars sold in South Africa in 1995 (22 000 units), climbing to 26% in 2000, 50% in 2005, 66% in 2010, and 75% last year.
Recent Research Reports
Automotive 2014: A review of South Africa's automotive sector (PDF Report)
The report provides insight into the business environment, the key participants in the sector, local construction demand, geographic diversification, competition within the sector, corporate activity, skills, safety, environmental considerations and the challenges...
Construction 2014: A review of South Africa's construction sector (PDF Report)
Construction data released during 2013 hints at a halt to the decline in the industry during the last few years, with some commentators averring that the industry could be poised for recovery. However, others have urged caution, noting that the prospects for a...
Electricity 2014: A Review of South Africa's Electricity Sector (PDF Report)
This report provides an overview of the state of electricity generation and transmission in South Africa and examines electricity planning, investment in generation capacity, electricity tariffs, the role of independent power producers and demand-focused initiatives,...
Defence 2013: A review of South Africa's defence industry (PDF Report)
Creamer Media’s 2013 Defence Report examines South Africa’s defence industry, with particular focus on the key players in the sector, the innovations that have come out of the defence sector, local and export demand, South Africa’s controversial...
Road and Rail 2013: A review of South Africa's road and rail infrastructure (PDF Report)
Creamer Media’s Road and Rail 2013 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...
Liquid Fuels 2013 (PDF Report)
Creamer Media’s 2013 Liquid Fuels report examines South Africa’s liquid fuels market, focusing on the business environment, oil and gas exploration, the country’s feedstock supplies, the development of South Africa’s biofuels industry, fuel pricing,...
This Week's Magazine
Updated 4 hours ago This month’s roundup includes details of TSX- and NYSE-listed Alderon Iron Ore’s power purchase and security agreement with Newfoundland and Labrador Hydro for the Kami iron-ore project, in western Labrador; US aluminium refiner and products manufacturer...
Creamer Media’s Electricity 2014 report provides insight into South Africa’s electricity generation, exploring the issues of State-owned power utility Eskom's generated power, coal supplies, electricity tariffs and demand-focused initiatives, as well as the...
This month’s report includes details of junior miner Papillon Resources’ mining permit for its flagship Fekola gold project, in Mali; the Waterberg Coal Company’s feasibility on the development of an opencast mine, in Limpopo, to produce ten-million tonnes a...
A structured approach, wherein managers personally engage at each level of the project, is necessary to mitigate delays to the workflow on mega construction projects, says State-owned Eskom Kusile power station projects GM Abram Masango. The 4 800 MW Kusile power...
Construction of transmission lines to evacuate power from a regional hydroelectric project in East Africa, which was hanging on the balance following the withdrawal of financing by key partners, is now back on track. After six months of uncertainty, the African...