Foreign direct investment (FDI) inflows to Africa declined in 2002 by 41%, although in 30 of the region´s 53 countries inflows actually increased, according to the World Investment Report 2003(1), released today by UNCTAD. This downturn - from $19 billion in 2001 to $11 billion last year - occurred at a time of worldwide slumps in FDI flows and largely reflected two cross-border mergers and acquisitions (M&As) in South Africa and Morocco in 2001, of a magnitude not repeated in the region in 2002.
The outlook for FDI flows to Africa in 2003 is promising. Three major factors are likely to lead to a recovery: expanded exploration and extraction of natural resources (particularly petroleum), continued and enhanced implementation of regional and interregional free trade initiatives and advances in privatization programmes. Angola, Chad, Equatorial Guinea, Mauritania, Nigeria, Sao Tome and Principe and the Sudan are among the hopefuls for new FDI flows into the petroleum industry. Morocco, Nigeria and South Africa may further implement privatization programmes of their major public enterprises. Botswana, Kenya, Lesotho, Mozambique, Namibia, South Africa and Uganda are good examples of countries that can be expected to make gains as transnational corporations (TNCs) position themselves to benefit from advances in the African Growth and Opportunity Act (AGOA) and Everything but Arms (EBA) initiatives. According to UNCTAD´s survey of investment promotion agencies (IPAs), investment prospects in Africa would also be enhanced if the expected improvements in the investment climate were realized.
In 2002, African countries generally improved their FDI policies and participated increasingly in international investment agreements.
More than half of the countries marginally expanded their FDI inflows, while inflows for the others either remained the same or declined. Top FDI recipients in 2002 - Angola, Algeria, Nigeria, Chad and Tunisia - together accounted for half of all inflows. Some traditional best performers, such as Morocco and South Africa, were displaced in 2002 by newcomers (least developed countries, such as Angola and Chad) that were relatively unknown as hosts to FDI flows into the region (see figure).
Chad was the star African performer in attracting FDI in 2002. The country, which had received no FDI at all in 2001, last year registered inflows of over $900 million. Much of this investment is related to the proven oil reserves in the Doba basins of Lake Chad. Chad thus became the fourth largest recipient in Africa and the second largest among LDCs after Angola.
Outward FDI recovers
Outward FDI from Africa last year recovered from its negative performance in 2001, but remains small and dominated by six countries: Ghana, Kenya, Liberia, Morocco, Nigeria and South Africa. South Africa is still the largest source of investment outflows and is home to all three of the African firms on UNCTAD´s top 50 developing-country TNC list. South African TNCs have traditionally invested abroad in the mining sector, but their recent focus has been on telecommunications. MTN and Vodacom SA both made inroads into the telecommunications industries of many African countries. South African Breweries recently bought a 64% stake in Miller Brewing Co. of the United States, becoming SABMiller. SABMiller then went on to acquire Bira Peroni (Italy) and Harbin Brewery (China) this year.
1. The World Investment Report 2003. FDI Policies for Development: National and International Perspectives (Sales No. E.03.II.D.8, ISBN 92-1-112580-4) is available for US$ 49, and at a special price of US$ 19 in developing countries and economies in transition, from United Nations Publications, Two UN Plaza, Room DC2-853, Dept. PRES, New York, NY 10017, USA, T: +1 800 253 9646 or +1 212 963 8302, F: +1 212 963 3489, E: firstname.lastname@example.org, or Section des Ventes et Commercialisation, Bureau E-4, Palais des Nations, CH-1211 Geneva 10, Switzerland, T: +41 22 917 2614, fax: +41 22 917 0027, E: email@example.com; Internet: www.un.org/publications.