EY: FDI remains Africa’s key to sustainable growth

Ernst & Young says Africa is going to experience a multi-speed recovery, and key to that growth is foreign direct investment, which has seen a positive trend in new sectors despite a 50 per cent drop in 2020. Damilola Aloba, Partner at Ernst & Young, joins CNBC Africa for more.

Tue, 07 Dec 2021 14:45:17 GMT

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AI Generated Summary

Africa's multi-speed recovery path post-pandemic hinges on strategic foreign direct investment in emerging consumer-focused sectors.
South Africa leads in attracting FDI, while challenges persist in other key markets like Egypt and Nigeria, requiring targeted reforms to enhance investor appeal.
Investors are increasingly drawn to Africa's technology sector, leveraging the continent's youthful population and expanding digital connectivity for sustainable growth and innovation.

Africa is on the brink of a multi-speed recovery following the economic upheaval caused by the global pandemic. A recent report by Ernst & Young sheds light on the continent's potential for growth and the pivotal role that foreign direct investment (FDI) plays in driving sustainable development. Damilola Aloba, a Partner at Ernst & Young, shared insights on the evolving landscape of FDI in Africa and the emerging sectors that are attracting investor interest. The report highlights a 50% drop in FDI in 2020 but also points to a positive trend in new sectors beyond traditional extractive industries. Aloba emphasized the increasing interest from emerging market investors, signaling a shift towards sustainable consumer-focused sectors such as business services, technology, telecoms, and consumer goods. These sectors offer diverse opportunities for growth and innovation, positioning Africa as an attractive investment destination. South Africa continues to lead in FDI attraction, leveraging its diversified economy to draw in investors. However, challenges persist in countries like Egypt and Nigeria, requiring targeted reforms to enhance their appeal to investors. A key focus for investors post-pandemic is technology companies that can scale and aggregate customers, tapping into Africa's youthful population and expanding digital connectivity. The report underscores the potential for economic transformation through targeted investment in education, skills development, and infrastructure. Aloba emphasized that for Africa to realize its growth potential, a conducive business environment, good governance, and stable political landscape are essential. While there are hurdles to overcome, such as limited progress on initiatives like the African Continental Free Trade Area, the prospects for sustainable growth remain promising. As Africa navigates its recovery journey, FDI stands out as a critical driver for unlocking the continent's economic potential and fostering inclusive development. With a renewed focus on emerging sectors and investment opportunities, Africa is poised to chart a path towards long-term prosperity and resilience.