Foreign firms invest $50 billion in Africa in 2012

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In 2012, many foreign companies opted to invest in Africa. African countries recorded an estimated $50 billion in foreign direct investment inflows in 2012, the United Nations Conference on Trade and Development recently revealed in its 2013 World Investment Report.

According to the report, while investment in extractive industries remains the principal driver of FDI inflows to the continent, there was an increase in investments in the continent’s fast moving consumer goods sector, a trend that is likely a response to the increasing purchasing power of the country’s fast growing middle class.

UNCTAD reveals that between 2008 and 2012, the share of consumer-related industries in the value of greenfield investment projects in Africa grew from 7 percent of the total to 23 percent. Greenfield investments refer to investments in businesses or economic sectors that are new to a recipient country.

Emerging market companies were increasingly active on the continent in 2012 with the biggest investors coming from Malaysia, South Africa, China and India.

South Africa remains the continent’s biggest investor with its companies pushing FDI outflows of up to $4.4 billion out of South Africa and into other African countries.

Central Africa overall recorded FDI inflows of about $10 billion as its resource wealth continues to attract investment from mining companies. In addition, countries such as Mozambique, Tanzania and Uganda reaped the benefits of new discoveries of oil and gas. For instance, in Mozambique, Brazil’s Vale and London-listed Rio Tinto are developing huge offshore gas and coal deposits in the country and its Mozambique’s northern province, Cabo Delgado, has experienced a construction boom in response to the natural gas find in the country’s Rovuma Basin.

With these results, Africa was one of only two regions in the world to experience an increase in foreign direct investment in 2012 however, inflows to its two largest economies, South Africa and Nigeria declined. Nigeria’s FDI inflows fell from $8.9 billion in 2011 to $7 billion last year due to political insecurity while FDI flows to South Africa declined by about 24 percent to $4.6 billion in 2012.

In addition, African countries led by South Africa and Angola are overall increasing their investment overseas with FDI outflows from the continent tripling from $5 billion in 2011 to about $14 billion in 2012.

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