Intra-African foreign direct investment shows steady growth
Foreign Direct Investment (FDI) in Africa reached a record high of $83 billion in 2021, according to recent data.
This marks a significant increase from $39 billion in 2020, and accounts for 5.2% of global FDI.
Southern Africa, East Africa, and West Africa all saw an increase in FDI flows, while Central Africa remained flat and North Africa saw a decline.
Making the assertion at the First Annual Assembly of African Investment Promotion Agencies (IPAs) on Wednesday, January 25, CEO of the Ghana Investment Promotion Centre (GIPC), Yofi Grant, noted intra-Africa FDI has been on the rise in recent years.
Adding that, intra-Africa FDI has been growing at a rate of 12% annually from 2002 to 2008, excluding FDI to and from Mauritius.
In 2017, the stock of intra-Africa FDI reached a high of $52 billion, or 11% of Africa’s total FDI stock. Southern Africa, particularly South Africa, is the main source of intra-Africa FDI, comprising 60-70% of the intra-Africa FDI stock in most years. West Africa has also emerged as an important source of intra-Africa FDI.
Investment from Northern Africa has also increased in recent years, from less than 1% of Africa’s FDI stock in 2002 to almost 6% in 2018.
Despite the growth in FDI, Africa continues to lag behind other continents in terms of intra-African trade. Africa represents 15% of the global population, but only 2.3% of world exports. Meanwhile, 16% of its exports are destined for African markets.
However, there are significant differences among different countries, with some countries having relatively high rates of intra-African trade, while others have relatively low rates.
In an effort to increase intra-African trade and boost economic growth, the African Continental Free Trade Area (AfCFTA) has been established. The AfCFTA aims to increase intra-African trade by 81% by 2035 by liberalizing tariffs and removing market frictions that hinder intra-African trade.
The AfCFTA also provides a level playing field of rules and incentives for the international investor community, signaling that Africa is open and ready for business.
Recent data on FDI in Africa shows a significant increase in FDI flows to the region, particularly in Southern Africa, East Africa, and West Africa. Additionally, intra-Africa FDI has also been on the rise.
However, Africa continues to lag behind other continents in terms of intra-African trade. The AfCFTA aims to increase intra-African trade and boost economic growth by liberalizing tariffs and removing market frictions that hinder intra-African trade.
Themed “The Role of IPAs in Facilitating Intra African Trade”, the maiden summit of the Annual Assembly of Investment Promotion Agencies, focused on emerging opportunities the AfCFTA continues to present and how various development actors can leverage them to facilitate trade on the continent and boost socio-economic development.
The Annual Assembly of Investment Promotion Agencies serves as the official gathering for the 48 African IPAs to engage in discussions, exchanges, and knowledge sharing on policies, interventions, current trends in FDI, best practices on investment promotion and the AfCFTA.
