Report highlights rise in foreign investment in Eastern Africa

The report by Analyse Africa indicated 705 projects were backed by foreign investors throughout Africa in 2015, with infrastructure taking about 44% of the inflows.

According to the report, South Africa continues to dominate FDI by number of projects, recording 118 projects. However, the report said “Kenya recorded one of the biggest increases in FDI, with project numbers rising 49% to 85, totalling $2.4bn in investments.

The US was the top source country for FDI projects into Africa, “despite a decline of 4% in project numbers”, the report said. “Additionally, the value of these projects dropped 12% to $6.8bn.”

The UK was the second most prolific investor into Africa in 2015, helped by a nearly 50% increase in the number of FDI projects on the 2014 figures, to 76,” the report said. “Capital investment from the UK also increased 93%.”

Navjeet Virk((LINK)) of Pinsent Masons, the law firm behind Out-Law.com, said: “The steady increase of investment from Western Europe, in particular to East Africa, shows a promising and continued confidence in the economies of the area in the long term.”

Virk said: “Capital investment from the UK has increased by 93%, which demonstrates a receptiveness to investment which has not always been so apparent. Investors will need to stay tuned in to the differing cultural and political conditions of the region and adapt accordingly in order to make these investments a success.”

Infrastructure-related business activities such as electricity, construction and information and communications technology accounted for 13% of all projects into Africa and for 44% of capital invested, the report said. “Electricity, in particular, saw a 49% increase in capital investment and a 91% increase in project numbers.”

The report confirmed that South Africa continues its dominance in attracting FDI. In 2014, South Africa climbed two places to become the 13th most attractive destination for FDI in a survey by global consulting firm AT Kearney.

The report also echoed FDI data compiled earlier this year by professional services firm EY in its Attractiveness Africa (16-page / 1.21 MB PDF) survey, which said FDI flows to Africa “remained robust in 2015”. The survey said FDI project numbers increased by 7% year-on-year in 2015, from 722 projects in 2014 to 771 projects.

Research by UK-based business intelligence firm Visiongain has said Eastern Africa is “fast becoming one of the world's most interesting oil and gas hotspots” and can be expected to attract “tens of billions of dollars of investment over the next decade”.

The World Bank said last year that the African continent had become “the second most attractive investment destination in the world – ranking just behind North America – as investors are looking beyond the more established markets of South Africa, Nigeria and Kenya”.

“Increased investment and industrialisation will help to unlock the potential for job creation and poverty reduction in African countries,” the bank said. “Chinese FDI to Africa rose to $3.5bn in 2013, and nearly all African countries are benefiting from China’s participation today. In Ethiopia, total FDI inflows in 2013 accounted for 2% of gross domestic product. Intra-African investment is also on the rise, creating a virtuous circle that encourages greater foreign investment. Investors in Africa nearly tripled their share of FDI projects over the last decade, from 8% in 2003 to 22.8% in 2013.”

According to the bank, net foreign direct investment inflows to sub-Saharan Africa increased by 16% to a near-record $43bn in 2013, boosted by new oil and gas discoveries in many countries including Angola, Mozambique and Tanzania.