New investment hubs appear in East and West Africa: EY

A recent report from EY, a global leader in assurance, tax, transaction, and advisory services, has shed light on the changing landscape of foreign direct investment in Africa. According to the report, 2016 marked a significant decline of 12% in FDI projects and a 13% decrease in job creation opportunities on the continent. Ajen Sita, Chief Executive Officer of EY Africa, highlighted that 2016 was the worst year in the last two decades for Africa, with GDP growth reaching a mere 1.4%. This downturn was largely attributed to external factors such as economic uncertainties in the US, the Brexit transition, slow growth in Europe, and a stagnant Chinese economy. The reliance on the resource sector, coupled with low oil and commodity prices, further hampered FDI inflows into Africa. However, amidst these challenges, there are emerging investment destinations garnering attention from foreign investors. Sita pointed out that while traditional FDI hubs like Nigeria and Angola faced setbacks due to weak oil prices, new players like Egypt have been attracting significant capital inflows. In 2016, Egypt received 43% of all FDI into Africa, surpassing South Africa, which historically led in FDI projects but only received 8% of capital inflows. The resurgence in North Africa, particularly in Egypt, has been fueled by Chinese investments in sectors like construction and real estate. Notably, Asia-Pacific countries, led by China and Japan, have become key contributors to FDI in Africa, signaling a shift away from Western sources. One of the notable trends highlighted in the report is the growing interest in Francophone African countries, with Cote d'Ivoire emerging as a standout performer. The influx of foreign investments, primarily from France, into infrastructure and agriculture sectors in Cote d'Ivoire has led to economic growth and job creation. Sita emphasized the importance of attracting FDI to drive structural investments that benefit local communities and foster inclusive growth. By stimulating sectors like infrastructure and agriculture, economies can create more job opportunities and reduce inequalities. Against the backdrop of the World Economic Forum on Africa's theme of achieving inclusive economic growth with responsive and responsible leadership, Sita stressed the need for African nations to address issues of corruption, lack of transparency, and unresponsive governance. Promoting investor-friendly environments, fostering innovation, and prioritizing education and job creation are crucial steps towards sustainable economic development. Additionally, embracing digital technologies and adapting to the changing global trade landscape are essential for Africa to lead in innovation and entrepreneurship. In conclusion, while 2016 posed challenges for FDI in Africa, the continent is witnessing a shift in investment dynamics with new hubs emerging in East and West Africa. As foreign investors navigate through uncertainties on the global stage, African economies must prioritize structural reforms, transparent governance, and inclusive growth to attract sustainable investments and drive economic prosperity.