In 2023, global foreign direct investment drops to $1.3 trillion, with Africa's share amounting to $53 billion.
In the global economic landscape of 2023, foreign direct investment (FDI) saw a slight dip, with a 2% decline to $1.3 trillion. This trend was influenced by volatile financial flows through key European intermediary economies, according to recent reports.
Africa, a continent rich in resources, experienced a 3% decrease in FDI inflows, reaching $53 billion. This decline was primarily attributed to a 8% drop in developing Asia, with FDI flows into developing countries decreasing by 7% to $867 billion. However, excluding these conduits, FDI flows worldwide dropped by more than 10% compared to 2022.
Despite the overall decline, Africa demonstrated resilience in certain sectors. For instance, African investors led 20% of projects in services and selected manufacturing sectors under the AfCFTA (African Continental Free Trade Agreement). Moreover, the continent secured $10.8 billion in project finance for wind and solar energy projects, primarily in Egypt, South Africa, and Zimbabwe. Significant green ammonia and hydrogen ventures worth $10.8 billion are ongoing in Egypt.
Mauritania is home to a $34 billion green hydrogen project, while investors committed $4 billion to a green hydrogen project in Egypt and planned a $2 billion project in Morocco. These initiatives underscore Africa's commitment to sustainable energy solutions.
The total value of greenfield projects in developing countries rose by 20% in 2023. Africa saw an increase of 7% in greenfield projects, with over 800 projects announced. Notably, Nigeria's governmental efforts to attract greenfield investments, particularly in renewable energy, showed promising results, with the country's FDI increasing to $1.87 billion in 2023 from $895 million in 2022.
However, the value of international project finance in Africa dropped by 50% in 2023 to $64 billion. Project finance, crucial for infrastructure investments, saw a decline of 26%. This decrease in project finance could potentially hinder the continent's development trajectory.
M&A (Mergers and Acquisitions) activity plummeted by 46% in 2023, particularly impactful for foreign direct investment (FDI) in developed nations. This trend, coupled with the decline in project finance, suggests a challenging environment for FDI in 2023.
Despite these challenges, the AfCFTA Investment Protocol, adopted in 2023, is expected to boost intraregional FDI. The protocol aims to establish a conducive environment for investment within the continent, fostering economic growth and integration.
In conclusion, while the global FDI landscape experienced a slight downturn in 2023, Africa demonstrated resilience, particularly in the renewable energy sector. The adoption of the AfCFTA Investment Protocol offers a promising outlook for intraregional FDI in the coming years.
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