US Companies Are the Biggest Direct Investors in Africa—not China’s
Nov 6, 2018 Quartz Africa
United States businesses and investors made more foreign direct investments (FDI) in Africa than counterparts from any other country last year—up by 43% to 130 projects in 2017, according to EY Global’s 2018 Africa Attractiveness report. China’s corporate investments fell by 18% to 54. South Africa remains Africa’s top recipient of FDI but Morocco has caught up to share joint top spot.
United States businesses and investors made more foreign direct investments (FDI) in Africa than counterparts any other country last year. These US entities increased the number of American FDI projects in Africa by 43% to 130 in 2017 nearly twice the next country, according to EY Global’s 2018 Africa Attractiveness report .
Overall, African countries saw FDI number rise by 6% to 718 projects up from the previous year’s 676, which was the lowest in 20 years.
It is the latest metric that seems to contradict the idea that US corporate sector losing interest in Africa as China’s influence rises and president Trump focuses elsewhere. The US remains Africa’s largest investor, says EY after the continent saw the expansion in FDI projects after two consecutive years of decline.
More than three-quarters of the expansion was driven by real estate, hospitality and construction. EY says in the recent past US economic ties with Africa have been driven by the African Growth and Opportunity Act (AGOA), which grants 40 African countries duty-free access to the US for approximately 6,400 products — and programs, such as Power Africa.
Now, perhaps in a bid to counter the narrative that China’s influence in Africa is rising fast while the US falls off, Trump’s administration has doubled its development investment budget in Africa to $60 billion and launched a new agency which will be able to take equity stakes and other financial tools to invest in local businesses. It is a different route from China’s predominantly infrastructure focus but it is also welcomed by experts.
The big Western European economies, Germany, France and the United Kingdom, have also spent the last year discussing trade and investment in Africa and their corporates were right behind the US, with a 17% increase in the number of Western Europe FDI projects to 299. UK ‘s FDI projects rose by 76% to 72 in 2017, second to the US while France claimed third place with 61 projects in Africa.
But China’s direct investments actually dropped by 18% to just 54. In some cases Chinese infrastructure investments, which are arranged between governments may not show up in surveys like EY’s as there is not always transaction transparency with some of the African countries or the Chinese government.
United States businesses and investors made more foreign direct investments (FDI) in Africa than counterparts any other country last year. These US entities increased the number of American FDI projects in Africa by 43% to 130 in 2017 nearly twice the next country, according to EY Global’s 2018 Africa Attractiveness report .
Overall, African countries saw FDI number rise by 6% to 718 projects up from the previous year’s 676, which was the lowest in 20 years.
It is the latest metric that seems to contradict the idea that US corporate sector losing interest in Africa as China’s influence rises and president Trump focuses elsewhere. The US remains Africa’s largest investor, says EY after the continent saw the expansion in FDI projects after two consecutive years of decline.
More than three-quarters of the expansion was driven by real estate, hospitality and construction. EY says in the recent past US economic ties with Africa have been driven by the African Growth and Opportunity Act (AGOA), which grants 40 African countries duty-free access to the US for approximately 6,400 products — and programs, such as Power Africa.
Now, perhaps in a bid to counter the narrative that China’s influence in Africa is rising fast while the US falls off, Trump’s administration has doubled its development investment budget in Africa to $60 billion and launched a new agency which will be able to take equity stakes and other financial tools to invest in local businesses. It is a different route from China’s predominantly infrastructure focus but it is also welcomed by experts.
The big Western European economies, Germany, France and the United Kingdom, have also spent the last year discussing trade and investment in Africa and their corporates were right behind the US, with a 17% increase in the number of Western Europe FDI projects to 299. UK ‘s FDI projects rose by 76% to 72 in 2017, second to the US while France claimed third place with 61 projects in Africa.
But China’s direct investments actually dropped by 18% to just 54. In some cases Chinese infrastructure investments, which are arranged between governments may not show up in surveys like EY’s as there is not always transaction transparency with some of the African countries or the Chinese government.
| Country | Rank vs. 2016 | No. of projects | share | change |
|---|---|---|---|---|
| US | – | 130 | 18% | 43% |
| UK | +2 | 72 | 10% | 76% |
| France | -1 | 61 | 9% | -25% |
| China | -1 | 54 | 8% | -18% |
| Germany | +5 | 39 | 5% | 105% |
| Switzerland | +1 | 30 | 4% | 11% |
| South Africa | -1 | 29 | 4% | 0% |
| Netherlands | +8 | 22 | 3% | 175% |
| UAE | -4 | 19 | 3% | -46% |
| Italy | -1 | 17 | 2% | -15% |
“Over time and as Africa’s growth accelerates, we anticipate that South Africa’s share of inbound FDI will continue to decline, relative to the rest of the continent. This will be driven by sustained strong growth, particularly in the Eastern-hub economies, and revived growth in the West hub,” said EY Africa chief executive Ajen Sita.
| Country | 2017 | 2016 | up/down | 2017 Share |
|---|---|---|---|---|
| South Africa | 96 | 139 | – | 13% |
| Morocco | 96 | 81 | +1 | 13% |
| Kenya | 67 | 40 | +3 | 9% |
| Nigeria | 64 | 51 | +1 | 9% |
| Ethiopia | 62 | 16 | +7 | 9% |
| Egypt | 56 | 79 | -2 | 8% |
| Ghana | 43 | 28 | +1 | 6% |
| Tanzania | 35 | 22 | +1 | 5% |
| Algeria | 24 | 17 | +2 | 3% |
| Cote d'Ivoire | 23 | 34 | -3 | 3% |
| Uganda | 14 | 9 | +6 | 2% |
| Zimbabwe | 13 | 7 | +7 | 2% |
| Rwanda | 12 | 11 | +2 | 2% |
| Mozambique | 11 | 15 | -1 | 2% |
| Zambia | 11 | 13 | – | 2% |
| Others | 91 | 114 | – | 13% |
| Total | 718 | 676 | 100% |
EY rated Rwanda as faring better than any Africa country in attracting FDI which it measured as 1.5 FDI projects for every $1 billion of GDP. When measured on the same metric South Africa received only 0.32 projects, attracting just 20% of Rwanda’s number given the much smaller economy. The margin is even larger with other major economies including Nigeria and Angola which received only 0.16 and 0.02 projects respectively.
Zambia ratio of FDI projects to GDP is 0.55 in 2017 partly due to the cost of Doing Business. The World Bank ranked Zambia 85th out of 190 countries in 2017. This year it lost two places to 87. In comparison, Rwanda improved to 29th this year from 41st shown in the chart below.
Companies are concerned about key issues macroeconomic issues in assessing a market's attractiveness. Key amongst these are fiscal policy and exchange rate stability according to EY where Zambia has work to do to rein in debt-fuelled fiscal spending to land on a sustainable development path.
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