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EY: Africa continent records 50% drop in FDI

Despite the Africa continent recording its worse economic recessions in 50 years with a 50 per cent drop in Foreign Direct Investment (FDI) inflow, the broad services sector, including business services, telecoms, media and technology, financial services and consumer, attracted 72 per cent of Africa’s FDI, according to EY’s 11th Africa Attractiveness Report just released.

 

The EY Africa Attractiveness survey provides an indepth analysis into foreign direct investment and economic progress in Africa. The extractive sector—mining, oil and gas, on the other hand, accounted for only 4% of FDI inflows in 2020. This, in essence, does not mean that Africa is not still heavily reliant on commodities.

 

This is one of the key findings as reveals in the Report, noting that FDI into Africa last year fell by 50 per cent, the hardest-hit region worldwide.

 

“This could be ascribed to its still largely resource-export dependent economies, which felt the impact of commodity price declines and rapidly decreasing demand, particularly from China, causing them to fall into recession,” according to Anthony Oputa, EY Regional Managing Partner for West Africa and EY Nigeria Country Leader.

 

The report further shows Africa’s overall GDP contracted by 2.4 per cent in 2020, noting, however, that this is less than the 3.6 per cent contraction in the overall global GDP.

 

Noting that Africa, along with the rest of the world was significantly impacted by COVID- 19, causing lots of business disruption across industries and sectors, Oputa however, said all hope is not lost, given that despite the drop in FDI, Africa is on the path to multispeed recovery.

 

“While Foreign Direct Investment fell sharply in 2020, this is only half the story.

 

The share of FDI into services sectors is rising rapidly, which will support job creation over time,” he said.

 

But investment flows are changing, and it is the services sector that is enticing the lion’s share. Environmental concerns are among the factors driving this shift.

 

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