As of 2014, Ethiopia is the eighth largest recipient of Foreign Direct Investment
(FDI) in Africa, up from the 14th place it sat on in 2013, according to the new Ernst & Young (EY) attractiveness survey on Africa.
The 2015 survey entitled “Making Choices” found that Ethiopia accounts for 18.5% of the FDI Africa attracted. The report attributes the large FDI to the country’s large population, currently at 94 million, and to its affordable workforce. Ethiopia, Africa’s fastest growing economy, has been slowly opening up to foreign investment in manufacturing and retail. On the other hand, the telecommunications and financial services sectors remain closed.
On a continental level, FDI inflow fell by 8.4% percent in 2014. While major economies such as Nigeria and South Africa failed to attract large FDI project, the average value of Sub-Saharan projects also doubled from USD 67.8 million in 2013 to USD 174.5 million in 2014.
“Mozambique and Ethiopia were among the star performers attracting growing inflows of projects witnessing an 88.2% and 47.1% growth, respectively. Over the long term, South Africa has been the most popular destination for FDI projects, attracting twice as many projects over the past five years than any other African country,” EY stated in a press release. While most of the FDI in Africa came from western European countries, investors from the U.S and the Middle East have also focused their attention on the continent.
“US-headquartered companies are the largest investors into Africa last year, launching 101 FDI projects, and accounting for 13.8% of total FDI projects in Africa, an increase from a 9.8% share in 2013. South African investors were again prominent, initiating the second-most FDI projects in the continent. UK investment was down substantially, but investors from the UAE and France were resurgent, ranking fourth and fifth respectively,” EY said.
The growth of consumption and the spreading urbanization in Africa are crucial facilitators of FDI in the continent. The flow of foreign investment in the real estate, hospitality and construction sectors has increased significantly. They are now the leading sectors for FDI with a percentage share in capital value at 43.8% and job creation at 33.6%.
Despite Africa’s ability to attract considerable FDI, investors’ perception of Africa’s attractiveness has decreased slightly, according to the EY survey.
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