Foreign Investment in Africa is Booming

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This week U.S. Commerce Secretary Penny Pritzker is leading an energy business development mission to West Africa with stops in Ghana and Nigeria.  The mission will help US companies launch or increase their business in West Africa.  Both countries are facing considerable growth and need the foreign investment as they expand their energy resources.

This Pritzker mission is just one more example of the remarkable growth in foreign investment taking place in Africa.  The Wall Street Journal projects that foreign investment in African economics will reach a record $80 billion in 2014 and that Africa will see robust economic growth of 4.3 percent in 2014 and 5.7 percent in 2015.

The US, the UK, and France are still leading the way in foreign investment.  However, the Chinese are catching up fast.  We expect to see China continue to compete vigorously in Africa on infrastructure, agriculture, mining, energy and other projects as well as for access to resources.  In addition, other countries, such as India, Turkey and Brazil are paying increased attention to Africa’s commercial opportunities.

While growth and foreign investment in Africa overall is very strong, the underlying performance of specific economies varies dramatically.  East and West African economies are doing the best and strongly outpacing the world’s economy.  Here too, specifics matter: Sierra Leone, Eritrea and Zambia are among the top ten countries expected to have the world’s highest GDP growth rates in 2014, but they also among the world’s poorest.  Yet, the International Monetary Fund (IMF) finds that eight of the 12 recently fastest-growing economies in Africa did not rely on natural resources and together grew more quickly even than oil producers.  Six diverse countries have had years of sustained growth and investment: Burkina Faso, Ethiopia, Mozambique, Rwanda, Tanzania and Uganda.  There is also strong growth and investment in Morocco, Tunisia, Ghana, Kenya and Nigeria.

For those companies planning to invest in the African market, care must be given to select the right place in terms of growth, market composition and infrastructure, among other considerations.  Also, governance, policy and legal considerations vary greatly from country to country and from sector to sector.  In addition, a company is strongly advised to analyze the regulatory terrain they will face.  Companies also benefit from seeking to ensure that their investments are consistent with national development strategies, including as it relates to job creation, technology transfer, and local market development.

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