By Peter Egwuatu
As cross-border investments across Africa gained traction over the last five years with South Africa being the largest investor into the rest of the continent, Nigeria has recorded two large scale investments worth $2.5 billion.
The Ernst and Young, EY, 11th Africa Attractiveness Report has revealed that: “In 2020, the country announced two large-scale investment projects in the communication sector, worth $2.5billion.”
The Report also noted that despite Africa continent recording its worse economic recessions in 50 years with a 50% drop in Foreign Direct Investment (FDI) inflow, the broad services sector, including business services, telecoms, media and technology, financial services and consumer, attracted 72% of Africa’s FDI.
The EY Africa Attractiveness survey provides an in-depth 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, according to the report, does not mean that Africa is not still heavily reliant on commodities.
“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.
For Anthony, ”Africa, along with the rest of the world was significantly impacted by the COVID-19 pandemic, causing lots of business disruption across industries and sectors.
“All hope is not lost, noting despite the drop in FDI, Africa is on the path to multi-speed 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” Anthony stated.
According to Olufemi Alabi, EY Partner and Strategy and Transaction Lead, who is also the EY Parthenon Leader for West Africa, ” Africa’s economies have been rapidly transforming through the first two decades of the new millennium, making them less dependent on extractive industries, as they aim to become more sustainable and competitive. Investors are moving away from oil exploration and mining to ‘new age’ sectors, including ICT, retail and business services.
This trend is likely to accelerate as energy investors are increasingly compelled to meet stringent zero net carbon emission targets.”
Also, the report states that, across Africa, East Africa was most robust, with Tanzania and Ethiopia growing fastest in 2020. But Southern Africa was greatly affected, with South Africa falling into a deep recession.