27th December 2021


Africa is Ready for a New Wave of Foreign Direct Investments

The data is very hard to ignore, says the UNCTAD.

Struggling with lower vaccination rates, high debt and a lack of quick and efficient strategic response against the pandemic, Africa is in dire need of resources. COVID-19 has certainly multiplied the number of challenges in the region, some problems are very new and others can be traced back to generations.

According to a very recent report by the WHO, the continent is experiencing a sharp 83 percent increase in new COVID-19 cases, all driven by the Delta and Omicron variants. At the same time the organization is registering fewer deaths and much less severe cases when compared to previous waves of the virus.

The critical importance of vaccines is clearer than ever for government officials, businesses and institutions, as they are trying to apply innovative measures to contain the spread of the virus, and attract foreign direct investment opportunities in order to mitigate the higher unemployment rates we are seeing so far.

The status of FDI worldwide

The latest trends monitor by the United Nations Conference on Trade and Development (UNCTAD) showed that in the first half of 2021, global foreign direct investment flows reached an estimated $852 billion dollars, in what is considered a “stronger than expected” result, recovering more than 70% of the losses provoked by the pandemic itself.

Developed economies had the greater success, growing at three times the pace in comparison with the same period of time in 2020. But developing nations were not that far behind, as they managed to increase foreign direct investment flows up to $427 billion in the first half of 2021, an outstanding achievement for economies in South-East Asia and Africa.

Certainly, global investors are extremely interested in working on projects related to infrastructure, all due to the very favorable environment for long-term financing options that we’re experiencing right now. China has been the leader in that specific area, conducting large amounts of money to a vast number of projects being made in the African continent, even through the darkest of COVID times during last year.

New chances

While most African economies shrank by 2.1 percent in 2020, the African Economic Outlook is projecting a moderate growth of 3.4 percent in 2021, helped by a rebound in commodity prices, higher exports, increased vaccination rates and a resumption of tourism. The perfect storm for an economic miracle? Some experts believe so.

Despite COVID, Africa is now a very different place to what it used to be, it is still the fastest growing region of the past 10 years, and a very good destination for foreign direct investments since it opened to world markets in the latter part of the 20th century.

With new sources of investment, countless emerging industries and sectors have expanded massively since the start of the millenium, and for governments and bilateral institutions in Africa, FDIs are a high priority issue that needs to be looked upon with the most objective long-term vision.

Most FDI flows in Africa have been historically related to manufacturing, services, hard resources, coal and oil, accounting for more than $200 billion in projects related to international interests. Experts in the topic have been very vocal about other business opportunities to capitalize on, such as IT services, renewable energy, communications and logistics, sectors that have enjoyed unprecedented levels of expansion and demand within the continent.

By focusing on certain specific areas of the economy and public life, Africa can certainly improve its current condition and increase the chances of recovery by 2023. One of those fundamental sectors is tourism.

Responsible for more than 7% of the continent’s GDP, tourism plays a crucial role in Africa’s path to total recovery. We’re talking about an industry that contributes more than $160 billion a year, numbers that are extremely hard to ignore. Even more when there’s a growing middle class considering international travel once the COVID storm clears.

Africa will cherish international support

The pandemic has reframed everything in regards to business opportunities in the continent, opening new ways for investors ready to dive into a new wave of foreign direct investments in Africa. Right now, governments are working around the clock in order to improve the business climate just to attract more international prospects.

Programs like the Enhanced Integrated Framework are outstanding innovative platforms aimed to assist investment promotion agencies, fostering and improving the scope of foreign direct investment in the region. Africa needs more of this, opening opportunities for investors and talents from all corners of the world is the best option, and more than any other continent it will embrace those splendid opportunities for years to come.