London, England — 04 May 2012 – The African continent received its largest ever share of global foreign direct investment in 2011, but potential investors without a business presence in the continent still view it as the least attractive investment destination in the world.
A report by the global accounting firm Ernst & Young painted a mixed picture for investment prospects in the continent of 1 billion people, reports Reuters. Despite the growth in FDI, optimism over economic reforms and a consumer boom, fears over corruption and political instability often affected investors’ perceptions, it said.
“Despite high optimism, high growth and high returns, the perception gap still exists and the African continent as a whole still attracts fewer FDI projects than India and far fewer than China,” said Ernst & Young managing partner Ajen Sita.
The number of FDI projects in Africa grew by 27% from 2010 to 2011, close to levels last seen before the financial crisis, the firm said in its 2012 Africa Attractiveness Survey.
The continent attracted 5.5% of global FDI projects “’ up from 4.5% the previous year and its highest proportion ever, with significant inflows into infrastructure-related and services sectors. The 857 new FDI projects in 2011 were just short of the peak seen in 2008, when there were 901 projects.
Ernst & Young polled 505 global executives, and 60% said their perception of Africa as a business destination had improved over the past three years. Nearly three quarters said they believed Africa would become more attractive to potential investors over the next three years.
But respondents found Africa less appealing when compared to other regions, the report said, though it added that there was a stark contrast between those who already had a business presence in the region and those who didn’t.
The former ranked only Asia ahead of Africa, while the views of the latter were overwhelmingly negative.
“In fact, for those respondents with no business presence in Africa, the continent is viewed as by far the least attractive investment destination in the world,” the report declared.
FDI inflows to Nigeria, South Africa and Angola are forecast to average US$40.6 billion per year over the next five years as their oil and mineral reserves draw investors from emerging and developed markets, the report said. Around a quarter of a million new jobs are likely to be created in the three countries as a result.
Intra-African investment has also been a significant driver of growth, with South Africa Kenya and Nigeria among the top investors into the rest of the continent.
FDI inflows to South Africa were projected to average US$10 billion a year, generating up to 125,000 new jobs, compared with US$7.6 billion a year and 30,000 new jobs in Angola.
Ernst & Young said more regional integration and increased investment to close the infrastructure gap, which will require an estimated US$90 billion annually, would boost Africa’s standing among investors.
“In the midst of a global economy that is being reshaped, with growth and capital flows shifting from north to south and west to east, Africans have a unique opportunity to break the structural constraints that have marginalised the continent for decades, if not centuries.”
Source: Reuters. For more information, click here.