Africa’s outlook is still bright

Foreign direct investment (FDI) from China into Africa has boosted the continent’s infrastructure and changing the way other players do business here.

The total level of external financial inflows into Africa has increased from $40,4-billion in 2000 to $192-billion in 2013. This is largely attributed to the inward FDI from China with investment mainly going into primary resource sectors and infrastructure.

This is one of the findings from the ICAEW (the Institute of Chartered Accountants in England and Wales) Economic Insight: Africa Q3 2015 report. Commissioned by ICAEW and produced by the Centre for Economics and Business Research (Cebr), it provides a snapshot of the region’s economic performance focusing specifically on Kenya, Tanzania, Ethiopia, Nigeria, Ghana, Ivory Coast, South Africa and Angola.

Michael Armstrong, regional director of ICAEW Middle East, Africa and South Asia, says: “China has approached African economies in a very different way to Europe, focusing less on official aid and engaging more aggressively through foreign direct investment and trade. This has been a game changer for the development industry, forcing European countries to rethink their strategy of connecting with the continent.”

At turn of the century, private finance constituted 62% of African economies’ total inflows. Today, that number has risen to over 70%, signalling a shift in investors’ perceptions of the market. Thanks to resource wealth, West Africa and Southern Africa are leading the way, attracting the majority of FDI; though East Africa is catching up. This is partly thanks to efforts for closer integration in the East African Community (EAC), which has involved harmonising investment regulations across the region and reducing red tape.

Much of the non-resource focused growth can be attributed to African infrastructure projects and investment in consumer-oriented industries including: rail projects in Uganda, Nigeria and Zimbabwe; Ethiopia’s textile, real estate, automobile and rail industries; Eritrea and Tanzania’s shipping industries; and Kenya and Rwanda’s real estate industries.