East Africa leads other regions as investors’ destination
Technology development has been described as a key element to attracting Foreign Direct Investments (FDIs), especially in Nigeria and rest of Africa.
According to EY Africa Government & Public Sector Leader, Sandile Hlophe, at the opening of the World Economic Forum (WEF) in Cape Town, South Africa, yesterday, technology-focused FDI in Africa and the rest of the world is rising steadily as the pace of digital transformation picks up.
Hlophe, in the EY Africa Attractiveness report 2019, noted that while Africa is still behind the technology curve, there is a once-in-50-years opportunity for the continent to leapfrog incremental technology advancement.
According to him, adopting digital transformation successes from more advanced countries – such as intelligent automation, cloud-based software deployment and data storage – Africa can quickly scale up its technology use.Hlophe added that the Fourth Industrial Revolution (4IR) meant investing in digital infrastructure that enables independent devices (such smart phones, computers and vehicle navigations systems) to communicate with each other by exchanging and analysing data to provide humans with actionable insights.
“Getting business and government to work together in investing in digital infrastructure, such as 5G data networks, WIFI platforms and Cloud data centres will place African countries at the front of the FDI investment queue,” he stated.EY’s report revealed that Africa’s growth remains uneven, with East Africa out-pacing the rest of the continent. It noted that the continent grew 3.8 per cent in 2018, with Sub-Saharan Africa rising somewhat slower, at 2.6 per cent.
According to the report, FDI into Africa remains small by global standards, but prominent in relation to GDP. It disclosed that the US and Western Europe remain Africa’s largest investors, with FDI flows to the most diversified, business friendly economies.EY noted that African countries face an unprecedented set of economic challenges that need urgent attention that should be addressed by creating an enabling business environment.
Hlophe, who advises many levels of South African government on digital transformation, financial improvement and risk management, said that as aspirational as WEF Africa’s aims are, dialogue is only effective if followed by action.The EY chief noted that it was high time for a “sleeves rolled up, action orientated agenda” to accelerate FDI flows to the continent. “We need a shift from ideology and dialogue to accelerated implementation.”
Hlophe noted that attracting FDI should be one the most important initiatives for African governments, saying: “FDI helps in economic development and is especially important for developing economies as it leads to job creation and wealth creating economic growth, he continues.”He said that after a growth ‘drought decade’, Africa appeared to be making its way back onto a growth trajectory with FDI inflows to the continent expected to increase following a rise of 11 per cent in 2018.
Encouraging as the signs are, more needs to be done because Africa’s growth remains below potential. FDI inflows, for example, are still below the yearly average of the last 10 years.
Looking at South Africa, Hlophe noted that the country attracted the highest number of FDI flows projects in Africa (110). South Africa however only attracted $5 million in FDI, placing it behind Egypt ($12 million), Algeria ($9 million), Nigeria ($8 million), Ethiopia ($7 million) and even Zimbabwe ($6 million).
The report informed that Africa’s growth remains uneven, with East Africa averaging 7.0 per cent; North Africa 4.1 per cent; West Africa 3.2 per cent, and South Africa 2.6 per cent.EY noted that while the USA and France remain Africa’s single largest investors, with the US and UK resting – especially into SA and other English-speaking markets, France remains the key investor into French speaking Africa, whilst Portugal and Brazil invest primarily into Portuguese speaking Angola and Mozambique (although on asmall scale in absolute terms). It pointed out that East Africa’s growth remains world leading. Kenya, along with neighbouring Tanzania, Uganda, Rwanda and Ethiopia are all growing well above five per cent per year.