FDI inflows to Africa stable in 2014

Foreign Direct Investment (FDI) inflows to Africa remained stable at $54 billion in 2014, with decreases in North Africa being offset by rises in Sub-Saharan Africa, UNCTAD's World Investment Report 2015 has revealed.

According to the report, North Africa saw its FDI flows decline by 15 per cent to $11.5 billion.

It said the FDI fell overall in the Region because of tension and conflict in some countries, despite significant inflows to others.

The report, the 25th Edition was jointly launched, on Wednesday, in Accra by Mr Philip A. Cobbina, Lecturer, Business School, Ghana Institute of Management and Public Administration, and Mr Augustine Otoo, Director of Research, Ghana Investment Promotion Centre.

Mr Cobbina said the report looked at the contributions of multinational corporations in developing countries, fiscal leakage through tax avoidance, and the role of offshore investment links.

He said although tax avoidance is legal, there was the need for government to investigate the operations of multinational companies to ensure that they did not engage in tax avoidance or evasion to the detriment of the country.

It said in Sub-Saharan Africa, where investments from abroad rose by five per cent, there was variance by sub-region.

The report said FDI flows to West Africa declined by 10 per cent to $ 12.8 billion, as the Ebola outbreak, security issues and falling commodity prices negatively affected several countries; while East Africa saw its FDI flows increasing by 11 per cent to $ 6.8 billion.

It noted that FDI rose in the gas sector in Tanzania, and Ethiopia was becoming a hub for multinational enterprises producing garments and textiles.

It said Central Africa received $12.1 billion of FDI in 2014, up 33 per cent from 2013.

Mr Otoo said the passage of the new investment law, Act 865, is investor friendly and flexible; stating that the FDI flow to Ghana was $ 3.61 billion in 2013 but declined to $ 3.57 billion in 2014.

He urged the media to help propagate the country’s good image to the investor community.

According to the report, Foreign investment into Africa is increasingly being made by developing countries’ multinational enterprises, such as firms from China and India; meanwhile, a number of firms from developed countries in particular France, the United States, and the United Kingdom were large net divestiture from Africa during 2014.

It said demand from developing-economy investors for these divested assets was significant.

“As a result, African mergers and acquisitions increased by 32 per cent from $3.8 billion in 2013 to $5.1 billion in 2014, especially in the finance and oil and gas sectors,” it said.

The report said services accounted for the largest portion of Africa’s stock of inward FDI, although the share is lower than in other regions, and concentrated in a relatively small number of countries, including Morocco, Nigeria and South Africa.

It said services FDI nonetheless accounted for 48 per cent of Africa’s total stock of FDI, more than twice the share of manufacturing -21 per cent and significantly more than the primary sector - 31 per cent.

It noted that finance accounts for the largest portion of Africa’s stock of services FDI; by 2012 more than half of Africa’s services FDI stock was held in finance - 56 per cent, followed by transport, storage and communications - 21 per cent and business activities - 9 per cent.

The report said FDI into infrastructure and other services was becoming increasingly important.

It said the stock of FDI into the transport, storage, and communications industries grew more than four-fold between 2001 and 2012, from $ 8 billion to $ 34 billion.

The report observed that although FDI accounts for a small portion of total infrastructure financing and development in Africa because of the wide use of non-equity modes of operation by multinational enterprises, FDI is increasingly visible in, for instance, the growing information and communications technology network as investors look to capture expanding consumer markets.

“FDI in services is important in supporting the participation of African economies in global value chains, as an increasing part of value added in trade consists of services.

“It is also important in the context of financing progress towards the sustainable development goals,” it stated.