Welcome to the 5th edition of our annual Africa attractiveness survey. This milestone is an opportunity to pause and reflect on how Africa’s attractiveness has evolved.
Our mission, from the outset, has been to provide factual substance to the "Africa rising" narrative. Over the past five years, we helped tell new stories of economic growth and opportunity, democratic progress and human development. However, in telling these stories, we have also not shied away from the challenges that remain if we are going to unlock Africa's vast human and economic potential.
So where is Africa in its journey? EY's 2015 Africa attractiveness survey explores.
Geopolitical tensions and weak economic growth led to a 3.1% decline in greenfield FDI projects worldwide in 2014. FDI projects in Africa fell 8.4%, but remained well above pre-2008 levels. However, capital investment into the continent surged to US$128b, up 136%. And FDI created 188,400 new African jobs, a 68% increase. Spurred by a handful of megadeals, the average investment increased to US$174.5m per project, from US$67.8m in 2013. Africa’s share of global capital investment and job creation hit an all-time high in 2014.
Only Asia-Pacific attracted more FDI funds than Africa last year. Africa attracted more FDI funding than North America, Latin America and the Caribbean, and Western Europe, which historically draw signifi cantly higher FDI flows than Africa.
Political uncertainty following the Arab Spring in 2011 is beginning to fade, and North Africa is becoming more attractive as an investment destination. FDI investors returned enthusiastically to Egypt and Morocco. Project numbers in SSA reached their lowest point since 2010, however. Within SSA, some economies — including South Africa, Angola, Nigeria, Ghana and Kenya — received fewer FDI projects. But Ethiopia and Mozambique attracted growing inflows of projects.
Western Europe and intra-African investors remain the largest sources of FDI into the continent, though 2014 saw traditional investors, including those from North America and the Middle East, refocus attention on Africa. Investors from the US, France, the United Arab Emirates (UAE), Portugal and China were particularly active during the year.
Two trends defi ning Africa’s future growth path include rising urbanization and a growing middle class. In line with these trends, FDI data reveals strong inflows into real estate, hospitality and construction (RHC) in 2014: it emerged as the fourth-most attractive sector. Threeconsumer-facing sectors —telecommunications, media and technology (TMT); financial services; and consumer products and retail (CPR) again attracted the largest share of investor activity. Respondents to our survey are also excited about prospects in the relatively underexploited agricultural sector.
This year’s survey reveals that investor perceptions of Africa reached their lowest level since 2011. When asked about Africa’s attractiveness over the past year, only 53% of the respondents said it had improved, down from 60% in 2014. There was also a slight drop in confidence about the continent’s future investment attractiveness. As Africa’s perceived attractiveness declined, it ceased to be seen as the world’s second-most attractive region (after North America and joint-second place with Asia) and fell to fourth place, behind Oceania and a resurgent North America. Political risk factors, such as instability and corruption, remain the main barriers that discourage investment in Africa.
EY believes that Africa now has the potential to bring about a future that would have been unimaginable a generation ago. But to realize this potential, African leaders will have to drive the structural transformation necessary to achieve the goals of inclusive and sustainable growth. Here, we highlight the five priorities for action which we believe will be most critical to a successful African future.