Ghana Moves Up In FDI Investment Countries In Africa


AFRICA 6-10-Largest-economiesGhana has moved up one place, up from eight to the seventh position, in the league of countries that attracts foreign direct investment (FDI) in Africa.

2018 EY Africa Attractiveness Report also ranked Ghana second in West Africa for FDI attractiveness.

EY Africa Attractiveness Survey and Report is by Ernst & Young Company designed to help businesses make informed investment decisions and governments to improve their respective business environment while lightening barriers that may intercept future growth.


In 2017, FDI projects in Ghana increased by 15 more projects to 43, displacing Ivory Coast at the second position in West Africa.

Nigeria moved up from the fifth position to fourth but lost the third position to Kenya who in 2016 was at the fifth position.

South Africa, once the clear leader in attracting FDI, now shares the top rank with Morocco.

Ethiopia jumped seven places to become the fifth-largest FDI recipient, its highest ranking yet.

These shifting FDI dynamics illustrate a broader trend outside South Africa, as growth across the rest of the continent accelerates, so they take a greater share of inbound investment.

AFRICA 6-10-Largest-economies

After facing its lowest economic growth in over 20 years, Sub-Saharan Africa (SSA) posted a slow recovery in 2017. The International Monetary Fund (IMF) forecasts a modest rise in the region’s GDP growth from 2.8 per cent in 2017 to 3.4 per cent this year.

In tandem with improved economic performance, Foreign Direct Investment (FDI) projects into Africa rebounded from their lowest level in a decade. Last year, Africa registered 6.2 percent growth in inward investment projects compared with 2016.

The report reveals that West Africa attracted 172 FDI projects in 2017; Nigeria has a 37 per cent share, Ghana with 25 per cent then Ivory Coast with 13 per cent whiles the rest shared the remaining.

Sub-Saharan Africa is expected to grow more rapidly in 2018 than it did in 2017, which was the slowest growth rate since the turn of the millennium.

It is forecast that growth across the sub-continent will recover to 3.4 per cent this year, from 2.8 per cent in 2017.

This still lags behind Asia-Pacific considerably, and over the medium term, Africa will find it difficult to reach beyond the 5 percent plus growth levels it achieved prior to the global financial crisis in 2008.

Multi-speed regional growth continues, led by East Africa

Once again, we see a divergence between slow-growth markets (South Africa, Zimbabwe and Namibia) and rapid growth ones (Cote d’Ivoire, Ghana, Mozambique and the whole eastern region). Major oil producers, Nigeria and Angola, lie somewhere between the two extremes.

Though these economies are recovering well because of significantly stronger oil prices, their growth might be challenged again should oil prices begin falling.

Underpinning the continent’s growth recovery is an urgent need for economic reform. The largest and third largest Sub-Saharan African economies, namely Nigeria and Angola, having suffered severe recessions through 2016 and into 2017, acknowledge the need for diversification.

This entails a need to adopt pragmatic policies, encouraging inward investment, at the time they need it most. Until recently, both countries have been reluctant to allow exchange rates to float freely, as a result of which, they faced prolonged recessions.

In the longer term, the growth outlook is improving. In the short term, however, weak macroeconomic fundamentals continue to have a knock-on effect on exchange rates and inflation.

Despite Weak growth, FDI project numbers in Africa increased by 6 per cent in 2017.

Foreign investors committed to 718 FDI projects in Africa in 2017, a 6 percent increase from 2016. Given the continent’s economic recovery during the year, this was in line with expectations that FDI would rise in tandem with higher growth. Increase in FDI was aided by a continuing shift from extractive to sustainable investment.

In addition, investors in Africa often take a long-term view to investment. They recognise that low growth rates are not permanent. Moreover, given the more positive growth outlook until 2020, investors are willing to invest more.

Another factor that may have played a role in boosting FDI numbers in 2017 was that companies sought to benefit from the sluggish growth environment by investing while currencies are weak and thus gain a cost advantage.

Africa’s investments are more evenly spread across the regions

Investment interest in Africa is shifting, with four out of five sub-regions jostling to become primary FDI destinations. In 2017, East, West, Southern and North Africa attracted around a quarter of FDI projects each, with the central region accounting for only a marginal share.

This is in stark contrast to the situation twelve years back, when North Africa accounted for just under half of total investments, and with East and West Africa attracting considerably less FDI.

The shifting investment landscape is a function of numerous factors, including growth, investment policy and to some extent regional integration initiatives, particularly in the east of the continent.

East Africa becomes the biggest regional attractor of FDI, with Kenya Leading

East Africa continued to register notable GDP growth in 2017, performing stronger than all other regions across the continent. For various reasons, other regions recorded slower growth with some facing recession. East Africa’s growth saw the region registering a notable 82 percent increase in the number of FDI projects compared with 2016.

This evident rise is from a rather low base in 2016, when the region’s share of FDI projects fell sharply. The FDI numbers in 2017 not only recovered from the prior year, but also made the regions Africa’s major FDI hub for the first time.

US investment holds momentum

The US remains Africa’s largest investor, reporting an expansion in FDI projects after two consecutive years of decline. US companies launched 130 projects in 2017, against 91 in 2016 (43 per cent growth rate).

RHC drove more than three quarters of this increase. In the past, US economic ties with Africa were driven by the African Growth and Opportunity Act (AGOA) — granting 40 African countries duty-free access to the US for approximately 6,400 products — and programs, such as Power Africa. While the US focus on Africa under President Donald Trump seems less of a priority, the US corporate sector, nevertheless, continues to express a keen interest in building a presence across the continent.

Western Europe continues to build on historical ties

Western Europe, another well-established investor, also built on its already strong investments into Africa, up by 17 percent. However, emerging-market investments fell, with both intra-regional and Asia-Pacific investment declining by 12 percent and 13 percent, respectively. This is, in part, attributable to slower emerging markets growth and weak commodity prices.

Besides negotiating or finalizing Economic Partnership Agreements (EPAs) with more than 40 African countries, the European Union (EU) is tightening commercial ties with Africa on other fronts too. On the occasion of the fifth EU-Africa Summit in 2017, the EU pledged 44 billion Euros of sustainable investment for Africa. In terms of FDI, Western Europe initiated 17 percent more projects in 2017, after a drop in 2016.

Assessing how countries fare in attracting FDI

Through this analysis, it appears that countries with strong growth rates and that adopt more business-friendly policies tend to perform better in attracting FDI.

Rwanda is, by far, Africa’s most successful country in terms of attracting FDI. This is evidenced by the fact that Rwanda ranks as one of Africa’s most business-friendly destinations. It is also one of the continent’s most consistent rapid growth economies. Rwanda receives 1.5 FDI projects for every US$1 billion of GDP.

Measured on the same criteria, South Africa receives only 0.32 projects, attracting only 20 percent of what Rwanda does, given its relative size.

Major economies, such as Nigeria and Angola trail by an even larger margin, receiving only 0.16 and 0.02 projects respectively. Both countries also rank very low on the Ease of Doing Business rankings compared with their counterparts in the continent.

Africa needs both policy reform and resolve

In 2017, there was a noticeable change across Africa’s political landscape, and this has continued into 2018.

Leadership changes in Ghana, Angola, Zimbabwe, Gabon, and more recently in South Africa and Ethiopia, pave the path toward greater reform.

We have already seen policy reforms implemented in some of these countries, allowing them to attract a rising share of investor interest and FDI.

However, the global FDI landscape is becoming increasingly dynamic and competitive, but will also be shaped by the twin forces of geopolitical uncertainty and digitisation.

Decisions made and actions taken now will determine which African economies can consolidate the gains made over the recent past and allow them to build a platform for sustainable growth in coming decades. Otherwise, they face the risk of backsliding.

To attract a strong share of FDI and solidify its position on the global investment map requires considerable effort from many stakeholders.

Priority areas considered for the ranking

EY Africa Attractiveness Survey and Report is one of the many reports by Ernst & Young Company (headquartered in London) designed to help businesses make informed investment decisions and governments to improve their respective business environment while lightening barriers that may intercept future growth.

In the 2015 Africa attractiveness survey, highlighted five priorities for action for a successful African future which are;

Shared value (pursue profit with the purpose to achieve shared value), entrepreneurship (create enabling conditions for entrepreneurs and actively support SME development), regional integration (accelerate the process of developing regional markets with critical mass), infrastructure development (implement enabling infrastructure for growth) and partnership (promote collaborative partnerships across business, government and social sectors).

More commitment on the part of leaders in the public, private and social sectors is needed in these areas to help Africa realize its potential.

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