However, foreign direct capital investment into the continent surged to US$128 billion, up 136% in 2014 – a five-year high, with the number of jobs created from FDI jumping 68% resulting in 188 400 new positions across Africa.
The report combines an analysis of FDI data into Africa since 2003, together with a survey of over 500 global business leaders, in over 30 countries, about their views on the potential of the African market.
Ajen Sita, CEO at EY Africa, says: “In the past year, Africa has experienced stronger headwinds than in recent times. Consequently, economic growth this year is likely to be at its lowest in five years, dragged down by the impact of lower oil prices on the Nigerian and Angolan economies, the softening of other commodity prices, and South Africa’s sluggish growth.”
“At the same time though, economic growth across the continent remains resilient. Sub-Saharan Africa will still experience the second highest economic growth rate in the world this year, with 22 economies growing at a rate of 5% or higher.”
North Africa rebounds
Foreign investors are regaining their interest in North Africa, particularly in Egypt and Morocco as the political uncertainty following the Arab Spring in 2011 begins to fade. North Africa attracted 22.2% more FDI projects in 2014 than in 2013, and accounted for slightly more than half (51%) of all African FDI capital inflows, against just 19.1% in 2013.
And the number of jobs created as a result of FDI, in a region where they are sorely needed, more than trebled to almost 80 000.
In Sub-Saharan Africa (SSA), while key economies like South Africa, Angola, Nigeria, Ghana and Kenya received fewer FDI projects than in 2013, the average value of each project across the region almost doubled (from $67.8 million in 2013 to $174.5 million per project in 2014).
Mozambique (88.2%) and Ethiopia (47.1%) were among the star performers, attracting growing inflows of projects. Over the longer term, South Africa has been the most popular destination for FDI projects, attracting twice as many projects over the past five years than any other African country.
Traditional investors regain interest
Regionally, Western European and intra-African investment remain the top sources of FDI; though 2014 saw traditional investors, including North America and the Middle East, refocus attention on Africa.
US-headquartered companies led as the largest investors into Africa last year, launching 101 FDI projects, and accounting for 13.8% of total FDI projects in Africa, an increase from a 9.8% share in 2013.
South African investors were again prominent, initiating the second-most FDI projects on the continent. UK investment was down substantially, but investors from the UAE and France were resurgent, ranking fourth and fifth respectively.
Investor perceptions of Africa
Based on the results of the EY survey, perceptions of Africa’s attractiveness have deteriorated slightly over the past year.
Sita says: “The shift in perceptions is the lowest since we initiated our survey. However, it is important not to overstate this deterioration. Overall, a majority of respondents were positive about the progress made in Africa over the past year, and believe the continent’s attractiveness as a business destination will improve over the next three years.”
Click here for the EY Infographic on this topic.