Western Nations Still Africa’s Largest FDI Source Despite China Hype

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Written by Kevin Mwanza

Western countries are still making the largest foreign direct investment (FDI) in Africa through building of facilities for their businesses, unlike China which mainly focus on big infrastructure projects that enable it to make government-to-government partnerships.

According to a fDi Markets report, Africa received about $87 billion in FDI last year, with Western Europe accounting for more than half of this amount with an estimated $47.6 billion injection. North America was the second largest source of direct investments to the continent at $13 billion.

China was the fourth largest source of FDI, behind France, Greece and the US. It accounted for about seven percent of the Greenfield investments into Africa last year, investing $6.1 billion.

“Despite concerns by some officials that the US is getting outflanked in Africa by China and US companies are behind the curve when it comes to expanding into Africa, the numbers suggest the latter, at least, might not necessarily be the case,” Courtney Fingar said in a FT report.

The US had the most number of companies launching projects in Africa in 2014, with 67 firms announcing 97 projects. These projects amounted to about $8 billion investment deals.

Some of the American companies that invested on the continent last year include global tech giant IBM, which opened a new mainframe Linux and Cloud Innovation Centre in Kenya; Cummins, which also invested in an alternative energy project in Kenya; and Enviro Board, which announced plans to establish a building-board manufacturing facility in Zambia.

Fingar said such US and European companies are usually focused on “gaining a cost advantage, consumer markets and better export routes”, while Chinese firm preferred to invest in developed markets in Europe and North America where they can access new technologies and link-up with known global brands.