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Citizen Today, August 2011 - It’s time for Africa - EY - Global

Citizen Today, August 2011

It’s time for Africa

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Share of new FDI projects by top business activities (2003–10)

*Including: Extraction; logistics, distribution and transportation; ICT and internet infrastructure; design, development and testing; electricity; customer contact center; education and training; headquarters; maintenance and servicing.


Angola’s attractiveness for FDI will remain moderate but is expected to improve between 2011 and 2015. While it is expected that Angola will receive a significant amount of FDI over the next five years, concentration on its oil and mineral reserves (the main attraction for investors) will limit job creation prospects. Enriched by oil wealth, the country’s growing middle class will also be attractive to investors looking for new markets. But current levels of income inequality, skills shortages, underdeveloped infrastructure, and bureaucracy are all hindering efforts to attract foreign investment.


Egypt’s oil production is expected to fall as reserves mature and run dry, but the fossil fuel sector is still expected to attract investors over the next five years. Bigger attractions for investors are Egypt’s large, relatively well-educated population, sizeable domestic market and proximity to Europe. Slightly offsetting these positives are the high levels of bureaucracy and corruption, but recent government reforms should improve the institutional environment. Assuming that the political situation is resolved and reforms are continued, Egypt will remain an attractive destination for investors in the next five years.


Ghana has a sizable resource endowment: we expect continued investment in the oil and gas industries to contribute to the majority of FDI flows. Increasing oil revenues should indirectly boost other sectors. This is particularly true of infrastructure, although, if managed correctly, it could help fund improvements in industries such as health care and education. Ghana benefits from a stable political environment, with democracy well established and adhered to. However, Ghana needs to continue to invest in infrastructure, human capital and health care to attract more diversified FDI projects.


Kenya probably has the most highly developed economy in East Africa. It has a relatively well-educated and rapidly growing labor force, and is most often used as a hub by multinationals looking to develop East African markets. However, its relative lack of natural resources may make it increasingly hard for it to compete with its neighbors, and its still small domestic market, immature infrastructure and high levels of bureaucracy are barriers to investment that need to be addressed.


Morocco’s well-educated, relatively cheap labor force is its prominent resource. Close to Europe, it recently signed trade agreements with the EU and the US, and it’s sound macroeconomic policies are underpinned by good governance. These factors combine to make Morocco an attractive location for businesses looking to service the lucrative EU market. As a result, Morocco is expected to attract significant FDI inflows over the next five years, especially in labor-intensive industries, such as tourism and construction. On the downside, high levels of bureaucracy and the potential for social unrest caused by high unemployment may undermine FDI inflows.


Nigeria’s oil reserves (which stood at over 36b barrels in 2007) will continue to attract funds over the medium term, and we expect a large proportion of FDI to be concentrated here. However, the large domestic market and diversified economy mean other sectors such as communications, real estate and tourism will also attract attention. Holding Nigeria back are its relative shortage of key skills, poor infrastructure and high level of bureaucracy. The 2011 national democratic elections are a key milestone: if they go relatively smoothly, ongoing perceptions of high political risk should begin to diminish.

South Africa

South Africa’s comparatively well-educated labor force and its substantial natural resources will continue to attract investors into its diverse economy. Coupled with this, the domestic market is among the largest in Africa, the population is among the richest on average (although extreme income inequality means that many people remain in poverty) and the institutional environment is relatively conducive to business. Despite these overwhelming positives, inflows to South Africa are not expected to be large relative to GDP (around 2% to 2.5%). The economy’s wealth means it can afford to fund much of its own investment, and the country is expected to be a significant source of funds for other African nations up to 2015.


Driven by the rising price of gold that has increased 75% over the last three years, Tanzania’s gold reserves will continue to attract investor interest over the medium term. The country’s relatively well-educated labor force, coupled with political stability and the Government’s sound macroeconomic management of the economy, will add to Tanzania’s attractiveness. But the relatively small domestic market, poor infrastructure network and high levels of bureaucracy are a barrier to further investment in the non-mineral sector of the economy.

African markets must position themselves appropriately to accelerate growth and development, and avoid getting left behind by other emerging markets and regions.

Foreign direct investment into Africa has increased strongly in the past decade. We chart the continent’s success and explain what more can be done.

Five key findings

The key findings of It’s time for Africa: 2011 Africa attractiveness survey are:

Share of new FDI projects by top
business activities (2003–10)

  1. New FDI projects into Africa are forecast to reach US$150b by 2015, creating 350,000 jobs per annum.
  2. GDP growth is expected to average 5% through 2015, based on a return to growth in its main investors.
  3. Africa has great strengths, including an abundance of natural resources and a large workforce, plus significant growth potential.
  4. Challenges include skills scarcity, small market size for individual countries and weak infrastructure.
  5. Governments, foreign investors and domestic companies can all take action to make the most of Africa’s potential.

Information about the highlighted countries is available. Click to view.


Morocco Egypt Kenya Tanzania Ghana Angola South Africa Nigeria

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