While it is acknowledged there is no direct, or proportional, link between foreign direct investment (FDI) flows and development, it is nevertheless still an important indicator of a country’s prospects.

FDI flows also offer insight into the changing investor appetites and patterns, with global flows having been increasingly directed towards developing countries in recent years. In fact, developing countries received the bulk of investment for the first time in 2012 and that pattern has been sustained.

In its latest Global Investment Trends Monitor, the United Nations Conference on Trade and Development (Unctad) shows that FDI flows to developing economies remained resilient in 2014. In fact, they reached the highest level ever recorded of more than $700-billion, and accounted for 56% of global flows.

The increase was driven mainly by developing Asia, with China surpassing the US as the largest FDI recipient – inflows to China rose to an estimated $128-billion. By contrast, FDI flows to developed countries fell by 14% to an estimated $511-billion, significantly affected by the US’s fall to third-largest recipient, after being the top recipient in 2013.

However, inflows to Africa fell by 3% to around $55-billion in 2014, amid an 8% fall in global inflows to an estimated $1.26-trillion, from $1.36-trillion in 2013.

Unctad attributed Africa’s decline largely to a decrease in FDI to North Africa, with other subregions, including sub-Saharan Africa, experiencing similar inflows to those experienced in 2013.

“FDI into Africa was buoyed by increased inflows to Mozambique driven by its potential as one of the world’s largest liquefied natural gas exporters. FDI into North Africa declined by 17% to $12.5 billion, with continued civil unrest in Libya dragging down the region’s potential as an FDI host,” Unctad reported.

Africa-related cross-border mergers and acquisitions (M&A) increased by 41% to $5.4-billion, as investors looked to tap the continent’s growing consumer markets, with Nedbank’s agreement of the purchase of a 20% stake in Togo’s Ecobank for $490-million listed among the transactions concluded during the period.

Unctad said that private equity firms and Middle Eastern investors also played a greater role in Africa during 2014. “In Nigeria, significant cross-border M&A growth to $1.3-billion, especially into consumer- orientated sectors, helped counterbalance the decline in FDI to other sectors, stemming the level at $4.9-billion.”

Unctad also warns that the trends in global FDI flows are uncertain for 2015. “The fragility of the world economy . . . volatility in currency markets and geopolitical instability will act as a deterrent for investors. The decline in commodity prices will also lower investments in the oil and gas and other commodity industries,” Unctad said.