According to FDI reports and data from the Financial Times Group, Africa is now the fastest growing region in the world in absorbing foreign direct investment. In 2014, capital investment in Africa increased by 65% to approximately US$87 billion. The number of foreign direct investment projects increased by 6%.
Among them, foreign direct investment in North Africa more than doubled, from US$10 billion to US$26 billion; in sub-Saharan Africa, investment rose from US$42 billion to US$61 billion. Oil and gas investment accounted for about one-third of capital investment in Africa, reaching US$33 billion. Real estate is the second most popular industry at $12 billion, followed by communications at $6 billion.
According to the “2014 Africa’s Most Attractive Survey” released by Ernst & Young, the following fifteen African countries and provinces are the most popular with foreign investors, namely Gauteng, Western Cape, and KwaZulu in South Africa – Natal, Eastern Cape, Kahira in Egypt, Casablanca in Morocco, Nairobi in Kenya, Lagos in Nigeria, Luanda in Angola, Tunisia, Greater Accra in Ghana, Tangier in Morocco, Algeria Algiers, Dar es Salaam, Tanzania, and Maputo, Mozambique.
With the growth of foreign direct investment, African economies have achieved strong growth. Africa’s GDP grew by 5% in 2014, 1.5 percentage points higher than the global average. The World Bank and the International Monetary Fund predict that Africa’s economic growth will be between 4% and 4.5% in 2015 and will rebound to 5% in 2016 due to the impact of falling commodity prices and the Ebola virus crisis. The International Monetary Fund also predicts that seven of the top ten countries with the fastest economic growth in the world in 2015 will come from sub-Saharan Africa, and the growth rate in this region will be twice the global average.
Foreign direct investment in Africa has grown rapidly in recent years, from US$10 billion in 2000 to US$650 billion in 2013. The reasons are, first of all, Africa is rich in natural resources, such as minerals, oil, and natural gas discovered in recent years, which are urgently needed by many countries. Secondly, most African countries are moving toward political stability, are committed to building a more friendly investment environment, and have introduced policies to attract foreign investment. In addition, Africa has the youngest population and the largest labor market in the world. PricewaterhouseCoopers commented that in the next 30 years, one in every five children will live in Africa, and Africa will have the largest working population. At the same time, many developed countries have excess production capacity and saturated markets that need to be transferred to emerging markets on the African continent. These have made foreign investors focus on Africa.
Although Chinese companies entered Africa late, they have grown rapidly in the past two decades. The World Bank issued a report stating that since 2008, China has become the largest investor in sub-Saharan Africa among emerging countries. According to data from the Chinese Ministry of Commerce, in 2009, China surpassed the United States to become Africa’s largest trading partner. Chinese companies’ direct investment in Africa covers various industries, including agriculture, infrastructure construction, energy extraction, transportation, commerce, communications, finance, etc. China’s investment in Africa has driven the rapid development of Africa’s economy and has become an important engine in Africa’s economic development.
It cannot be ignored that although investing in Africa has huge opportunities and potential, there are also great risks. In African countries that develop and invest in oil or mineral resources, political instability is the most uncontrollable factor and the highest unpredictable risk. Secondly, African countries generally lack professional talents and have backward technical levels, which requires Chinese companies stationed in Africa to make a lot of efforts in talent selection and training. In addition, some African countries lack internal planning, coordination, and management capabilities among institutions. This is why Chinese investors need to spend a lot of energy on maintaining and communicating with government relations and project management when investing in Africa.