FOREIGN DIRECT INVESTMENT (FDI) in Africa doubled to US$39bn between 2004 and 2006. The total was broadly similar last year, at $36bn. That obviously looks most encouraging for this continent, or at least for those countries that have been the main beneficiaries.
However, a detailed report by Jeremy Stevens for the economic research department at Standard Bank shows that, unfortunately, Africa generally has far less to cheer about than those figures initially suggest. Stevens writes: “Despite the increase in absolute terms, Africa’s share of global FDI declined from 3,1% in 2006 to 2,7% in 2007.” He continues: “The entire sub-Saharan Africa (SSA) region attracted less FDI than Mexico, half of Canada’s and a mere one-fifth of China’s. Some further moderation is pos- sible due to likely deceleration in large inflows into oil industries over the next few years.”
Stevens adds: “FDI remains concentrated in a few countries. The top 10 FDI recipients in Africa accounted for nearly 90% of the continent’s inflows in 2006.” He urges: “Growth strategies centred on commodity exports are somewhat unsustainable.
“African economies are vulnerable to whipsawing terms of trade, currency fluctuations and numerous other factors. This discourages much-needed longerterm investment flows.” He observes: “The evidence indicates a clear positive link between economic diversification and export sustainability.”