AMN - Mining no longer leading investment sector – comment by Yolanda Torrisi

Mining is no longer the primary sector for foreign investment on the African continent, according to a new report from EY, with the real estate, hospitality and construction (RHC), and transport and logistics sectors attracting strong interest.

The Africa Attractiveness report shows that the mining sector, including industrial and precious metals, coal, oil, as well as natural gas, accounted for just 6.2% of foreign direct investment (FDI) in Africa in 2016.

Interestingly, overall FDI into Africa increased from 9.4% of the global total in 2015 to 11.4% in 2016, making the continent the second fastest growing FDI destination by capital.

EY says more than 20% of FDI globally emanated from the Asia Pacific with this figure increasing to more than 50% for Africa, which was an all-time record. The analyst says this is a clear sign of the ongoing diversification of investors interested in the continent.

EY believes the decreasing percentage for mining is due to a broadening of greenfield FDI projects beyond the extractive sectors, with most of the money (58%) flowing to the so-called ‘hub economies’ of South Africa, Egypt, Morocco, Nigeria and Kenya.

When measured by project numbers, South Africa remains the continent’s leading FDI destination, increasing 6.9%. Morocco regained its place as Africa’s second largest recipient with projects up by 9.5%, followed by Egypt, which attracted 19.7% more FDI projects than the previous year.

The report notes that there are new investment clusters emerging in Africa, with the Francophone and East African markets being of particular interest to investors. It also notes that Ghana, which is West Africa’s second largest economy, remains a key market for FDI.

EY’s African CEO Ajen Sita said, “Investor sentiment toward Africa is likely to remain somewhat softer over the next few years. This has far less to do with Africa’s fundamentals than it does with a world characterised by heightened geopolitical uncertainty and greater risk aversion.

“Investors with an existing presence in Africa remain positive about the continent’s longer-term investment attractiveness, but they are also cautious and discerning,” he adds.

The Africa Attractiveness report is based on EY’s Africa Attractiveness Index, which was introduced in 2016 to measure the relative investment attractiveness of 46 African economies based on a balanced set of shorter and longer-term metrics.

Yolanda Torrisi is Chairperson of The African Mining Network and comments on African mining issues and the growing global interest in the African continent. Contact:yolanda@yolandatorrisi.com