Foreign Direct Investment (FDI) flows to Africa fell by 16% last year, from $47 billion in 2019 to $40 billion in 2020according to UNCTAD.
According to the 'World Investment Report 2021', released this Monday by the United Nations Conference on Trade and Development (UNCTAD), "the cascading economic and health challenges due to the pandemic, along with low energy-related commodity prices, have significantly influenced investment on the continent."
The report, which reports a 16% drop in foreign investment in the region from €39.2 billion to €33.4 billion, points out that "commodity-dependent economies were affected more severely than non-resource-based economies."
UNCTAD anticipates "a tepid economic recovery and a slow distribution of vaccines, which threaten the scale of the investment recovery" and predicts that FDI on the continent will grow by only 5% this year, "below both the projected growth rate for the world and for developing countries."
Still, UNCTAD is optimistic about 2022, pointing to the foreseeable increase in demand for raw materials, the reconfiguration of global value chains, the implementation of important projects delayed by the pandemic, and the finalization of the free trade agreement in Africa.
Investments by companies betting on a country for the first time ('greenfield investments'), which are "a measure of investor sentiment and a harbinger of future FDI trends, fell 621TP2Q to $29 billion, down from $77 billion in 2019."
In addition, cross-border mergers and acquisitions fell 45%, from $5.8 billion in 2019 to $3.2 billion last year, while announcements on international project financing, which are especially relevant for large infrastructure projects, fell 74%, to $32 billion.
As for sub-Saharan Africa, the report points to a drop of 12%, with investments dropping to $30 billion, with a drop of $16%, to $4.3 billion, in investors' betting on Southern Africa, "despite the repatriation of capital from multinational companies in Angola having slowed, and with Mozambique and South Africa accounting for the majority of flows in this region."
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