Foreign Direct Investment (FDI) to West Africa fell by 11% to $11.3 billion in 2017 as compared to the previous year, according to World Investment Report 2018 released today.
The decline came due to Nigeria’s economy remaining largely depressed, according to the report by the United Nations Conference on Trade (UNCTAD). FDI to that country fell 21% to $3.5 billion. With domestic demand well below investor expectations, several consumer-facing companies from South Africa exited Nigeria in 2016.
A modest recovery in oil production and the general economy in 2017, as well as the introduction of an investor and export window to bid for foreign exchange, should help entice companies to return to Nigeria in the future. At the same time, new technology start-ups in Nigeria, backed by venture capitalists from South Africa and elsewhere, are helping to diversify FDI inflows.
Nigeria has attracted strong market-seeking technology inflows from United States firms, including Uber, Facebook, Emergent Payments and Meltwater Group. Chinese investments in the country consisted of efficiency-seeking manufacturing FDI into the textile, automotive and aerospace industries.
Ghana attracted $3.3 billion in FDI flows (down 7 per cent), on the back of fiscal consolidation and self-imposed reductions in Government investment spending. Until this past year, Ghana’s diversified economy had facilitated a continuous increase in its FDI flows since the 2000s.
A firm price for gold and ongoing investment from Italy’s Eni to develop the large Sankofa gas field could further encourage FDI in 2018. Sankofa produced its first oil in 2017, with Eni having contributed the largest amount of FDI in Ghana’s history through its 44% stake in the company.
In contrast, FDI into Côte d’Ivoire, was up 17% to $675 million, reflecting supportive public investments by the Government and economic diversification. As one of the two fastest-growing economies in Africa (along with Ethiopia), the country has attracted FDI into consumer goods. Heineken (Netherlands) invested $35 million in 2017 to double beer production and compete with Castel (France).
Hershey (United States) is set to help the country process more of its cocoa locally, boding well for future investment prospects. FDI into Senegal was up 13% to $532 million.
Russian producer KAMAZ will invest approximately $60.5 million in the first phase of truck assembly production in the country.
FDI flows to Central Africa decreased by 22% to $5.7 billion
Flows to the Congo fell by 67 per cent to $1.2 billion from $3.6 billion in 2016. The deepening economic crisis in the country, volatility in oil FDI and weak FDI in non-oil sectors contributed to the decline.
In contrast, the global race for cobalt used in electric car batteries supported 11% rise of FDI flows into the Democratic Republic of Congo, reaching $1.3 billion.
Glencore (Switzerland) bought two mining assets for nearly $1 billion, increasing its stake in cobalt and copper mines. Flows rose also in Equatorial Guinea (to $304 million from $54 million in 2016) and in Gabon, a major oil producer (up 21 per cent to $1.5 billion), the Report stated.