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FDI flow to Africa projected to grow by 5% in 2021

Africa FDI_IF_Image
Foreign Direct Investment flow to the continent has decreased by 16% in 2020 to $40 Foreign Direct Investment flow to the continent has decreased by 16% in 2020 to $40 bn, from $47 bn in 2019bn, from $47 bn in 2019

The Foreign Direct Investment (FDI) in Africa is projected to grow at a slow pace of 5 percent in 2021 as the investment supply decreased by 16 percent in 2020, from $47 billion in 2019 to $40 billion, as mentioned in the UNCTAD’s World Investment Report 2021. The pace is mentioned to be lower than both the global and developing country projected growth rates.

The report also mentioned that the falling economy and the resultant health challenge have contributed to the falling prices of energy commodities that have contributed heavily to the inflow of FDI. Additionally, the report also showed that countries that were dependent on commodities were more affected than non-resource-based economies. While Egypt received the majority of the shares, even then it was 35 percent lower than it was in 2019.

UNCTAD’s director of investment and enterprise, James Zhan mentioned that the primary reason for this slump was the challenging environment that affected all aspects of foreign investment. One of the important projects, Greenfield Projects announcements, a measure of investor sentiment and future FDI trends fell by 62 percent to $29 billion, from $77 billion in 2019. International project finance announcements also fell by 74 percent, dropping to $32 million.

FDI in North Africa has also witnessed a contraction of 25 percent to $10 billion, which stood at $14 billion in 2019. The primary FDI in Africa is directed to Sustainable Development Goals (SDGs) which also witnessed a contraction in 2020. Additionally, FDI outflows from Africa fell by two-thirds in 2020 to $1.6 billion, from $4.9 billion in 2019.

Seeing the dire conditions, Kristalina Georgieva, IMF managing director, appealed for more aid to the African countries to help them to bounce back from the pandemic, warning that the continent is facing slower growth, rising debt, and shortage of vaccines.

She said at the African Development Bank’s annual meeting, “Africa is now facing the world’s fastest growth rate for new Covid-19 cases, with an exponential trajectory even more alarming than during the second wave in January. It is a human tragedy – and an economic calamity.”

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