These days, it seems that everyone wants to invest in Africa. According to the most recent figures on foreign direct investment (FDI) from UNCTAD, which cover the year to the beginning of 2013, Africa was the only region of the world that attracted an increased total of FDI. But who are the big investors? A close look at the statistics reveals some surprising answers - and perhaps the most surprising is the growing role of India. Report by Richard Walker
African investment is growing. The latest figures on FDI flows show that in a year when FDI shrank throughout the rest of the world, only Africa managed to grow as an investment destination.
That is an important statistic: FDI is by far the most important investment measure, comprising as it does all investment outside of national stock markets - FDI represents new money coming into existing businesses, as well as investment in entirely new business projects, so-called 'greenfield' investments. Effectively, FDI measures global confidence in both countries and regions.
While the global total of FDI shrank from $1.65 trillion to $1.35 trillion, a fall of almost one fifth, African FDI grew to $5obn, up from $48bn the year before, and $44bn the year before that. So Africa is bucking the trend, which is for FDI to lag behind other economic indicators (which were largely in positive territory during 2012-2013).
In fact, most of the recent fall in global investment flows was concentrated in the developed economies: FDI fell by a third in what the UN defines as the developed world, back down to the levels of io years ago, while developing economies registered a fall of only 4%. Perhaps that is not too surprising, given that growth prospects are so much lower in the rich economies.
What may be more surprising is that investment in Africa remains so low. An annual FDI flow of $5obn is tiny compared to the global total of $1.35 trillion, a mere 3.7% of all the investment flows in the world.
Developing economies now receive more than half of all global FDI, but almost 20% of that total goes to South America, and over 3.0% goes to Asia. Africa may seem like the flavour of the month when measured by column inches devoted to the African economic renaissance, but the figures tell us that interest in Africa has yet to be translated into hard investment cash.
Nevertheless, Africa is unique in that inward FDI is growing. The space may be small, but many would agree that the best is yet to come, as Africa...