Africa attractiveness survey 2014

Executing growth

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Our 2014 Africa attractiveness survey reveals a dramatic improvement in the continent’s perceived attractiveness, now at second place, and although FDI numbers paint a mixed picture, companies are successfully growing in Africa.

Good progress, despite the setbacks

FDI in 2013

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In 2013, Africa’s share of global FDI projects reached 5.7%, its highest level in a decade. The number of new FDI projects in sub-Saharan Africa (SSA) increased by 4.7%, although the total number of new FDI projects declined by 3.1%, due to the political uncertainty in North Africa. However, the average size of FDI projects increased to US$70.1m in 2013, from US$60.1m in 2012. In terms of destinations, while South Africa maintained its position as the top FDI destination, emerging hotspots for investment are Kenya, Ghana, Mozambique, Uganda, Tanzania and Zambia.

 

Three key trends

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In previous editions of the Africa attractiveness survey, we have highlighted three broad shifts. These continued to gain traction in 2013:

  the growth of investment into SSA,
  the expansion of intra-African investment,
  the shift of investment from extractive to consumer-facing sectors

The prime factors behind the sub-Saharan African growth story are strong macroeconomic growth and outlook, improving business environment, rising consumer class, abundant natural resources, democratic dividend and infrastructure development.

African investors nearly tripled their share of FDI projects over the last decade, and Intra-African investment has also driven job creation on the continent. This growth is fueled by the need for improved regional value chains and strengthening regional integration.

With the diversification of economic activity in Africa gathering pace, growing employment levels are creating a new consumer class. This has paved the way for increasing FDI in consumer-focused services and manufacturing sectors. Sectors other than extractive industries are growing in importance.


Giant leap in Africa's relative attractiveness

Steadily moving ahead

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The most striking observation from this year’s survey is how far Africa’s perceived attractiveness has improved. In less than five years, Africa has risen to become the second most attractive investment destination in the world, tied with Asia.

South Africa, Nigeria and Kenya are considered the most attractive investment destinations in SSA, whereas Morocco is seen as the leading destination for doing business in North Africa, largely on account of its relatively stable political environment.

A stark perception gap remains

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However, the perception gap between those already doing business on the continent, and those with no business presence, remains striking.

More specifically, those already active on the continent rank it as by far the most attractive investment destination in the world today. Those who are yet to invest are far less enthusiastic, ranking Africa as the least attractive investment destination in the world. The gap could hardly be wider.

Even though investment perceptions have improved so dramatically, actual investment in Africa has not accelerated as much, since many potential foreign investors continue to view the entire continent as a high-risk destination.

This view is often based on perceptions that are 20 to 30 years out of date. But it is important to highlight the real challenges of doing business on the continent.

Africa is an inherently challenging place to do business, but many companies pursuing a long-term African strategy have generated excellent returns from their investments.


Successfully executing growth strategies in Africa

Some of the world’s largest and most-admired companies, emerging multinationals and regional growth companies are successfully executing growth strategies in Africa. This should instill confidence in the potential of Africa’s growing markets.

EY’s 7-P model

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We have captured the lessons these companies have learned in the form of the 7 Ps framework. This can assist businesses in their decision-making on, and in their responses to, the factors that are the most critical to effective strategy execution.

This is not offered as a recipe for success — there is clearly no such thing. However, a focus on these factors has been consistently evident in strategies that have been successfully, and sustainably, executed over time in Africa.

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FDI in 2013

EY - FDI in 2013

Source: FDI Intelligence.

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Three key trends

EY - Three key trends

Source: FDI Intelligence.

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Steadily moving ahead

EY - Steadily moving ahead

Source: FDI Intelligence.

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A stark perception gap remains

EY - A stark perception gap remains.

Source: FDI Intelligence.

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EY’s 7-P model

EY - EY’s 7-P model

Source: FDI Intelligence.