WEF: African inward investment is flowing in, but South Africa is lagging

Sandile Hlophe, EY Partner and Africa Region Government & Public Sector Leader. Photo: File

Sandile Hlophe, EY Partner and Africa Region Government & Public Sector Leader. Photo: File

Published Sep 4, 2019

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DURBAN – Sandile Hlophe, EY Partner and Africa Region Government & Public Sector Leader said that as aspirational as the World Economic Forum (WEF) Africa’s aims are, dialogue is only effective if followed by action. 

Speaking at the WEF in Cape Town, at the launch of EY’s new Africa Attractiveness report that looks at how South Africa and the African continent, are attracting FDI (Foreign Direct Investment) to grow their economies, Hlophe said that it was high time for a “sleeves rolled up, action orientated agenda” to accelerate FDI flows to the continent. 

Hlophe noted that attracting FDI should be one the most important initiatives for African governments.

He said that after an FDI ‘drought decade’, Africa appeared to be making its way back onto a growth trajectory with FDI inflows to the continent expected to increase by 15 percent this year, following a rise of 11 percent in 2018.

Encouraging as the signs are, more needs to be done because Africa’s growth remains below potential. FDI inflows, for example, are still below the annual average of the last 10 years.

South Africa 

Looking at South Africa, Hlophe noted that the country attracted the highest number of FDI flows projects in Africa (110). South Africa however only attracted US$5 million in FDI, placing it behind Egypt ($12 million), Algeria ($9 million), Nigeria (US$8 million), Ethiopia ($7 million) and even Zimbabwe ($6 million). 

“Despite being a country critically lacking in consumer and business confidence, and with employment stubbornly high, it is encouraging that South Africa remains on investors’ radar. 

“An urgent focus on implementing economic reforms as outlined in the President’s economic stimulus and recovery plan announced in September 2018, and progressing State Owned Enterprise plans to strengthen governance and stabilise cash flows, will go a long way towards stimulating increased FDI flows,” he added. 

Technology as FDI magnet 

Technology focused FDI, in Africa and the rest of the world, is rising steadily as the pace of digital transformation picks up. 

“While Africa is still behind the technology curve, there is a once-in-50-years opportunity for the continent to leapfrog incremental technology advancement. By adopting digital transformation successes from more advanced countries - such as intelligent automation, cloud based software deployment and data storage - Africa can quickly scale up its technology use.”

Hlophe added that the Fourth Industrial Revolution (4IR) meant investing in digital infrastructure that enables independent devices to communicate with each other by exchanging and analysing data to provide humans with actionable insights. 

Key investors

According to the report, two countries, USA and France continue to be the single largest investors in the African continent. 

The report shows that North America has 504 projects on the continent and has created 69000 jobs as well as invested $38 billion in capital. 

Europe has 1547 projects in Africa and has $83 billion in capital while creating 186000 jobs. 

The US and the UK have invested in South Africa and English speaking markets while continues to be a key investor into French speaking Africa. Portugal and Brazil have invested mainly in Portuguese speaking Angola and Mozambique. 

FDI 2014-2018 by source: 10 largest investors

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Country

Projects

Jobs created

Capital (US$m)

United States of America

463

62004

30885

France

329

57970

34172

United Kingdom

286

40949

17768

China

259

137028

72235

South Africa

199

21486

10185

UAE

189

39479

25278

Germany

180

31562

6887

Switzerland

143

13363

6432

India

134

30334

5403

Spain

119

13837

4389

BUSINESS REPORT ONLINE

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