56Tremendous opportunities await foreign direct investors, but geopolitical issues, China’s lending practices and human rights violations may stymie that potential.

 

“Foreign investors are attracted to market size, openness, policy certainty and predictability,” Adhikari says. One factor investors can count on is Africa’s growing population, which is expected to double to 2.5 billion people by 2050. Studies conducted by the University of Toronto’s Global Cities Institute predict that Africa will account for at least 10 of the world’s 20 most populous cities by 2100, with many cities eclipsing New York City in growth. This trend makes Africa one of the fastest-growing consumer markets in the world.

Shirley Ze Yu, director of the China-Africa Initiative at the Firoz Lalji Centre for Africa at the London School of Economics, reckons that the continent could replace China as the world’s factory.

“The demographic dividend will place Africa prominently in the global supply chain recalibration as the Chinese labor dividend diminishes,” she says.

Africa may also benefit from the African Continental Free Trade Area (AfCFTA). If implemented, observers say the region will become the fifth-largest economic bloc in the world.

The pact could be a game changer in making the continent attractive to FDI, the World Bank notes. AfCFTA has the potential to generate greater economic benefits than previously estimated, with FDI totals potentially increasing 159%.

Last, while sectors like oil and gas, mining and construction still command huge stocks of FDI, the global push toward net-zero, coupled with Africa’s vulnerability to climate change, means “clean” and “green” investments are on an upward trajectory.

Data show the value of investments in renewable energy has increased from $12.2 billion in 2019 to $26.4 billion in 2021. Over the same period, the value of FDI in oil and gas declined from $42.2 billion to $11.3 billion, while mining sank from $12.8 billion to $3.7 billion.


Post time: Dec-07-2022