Foreign direct investment into Africa to double by 2014: UN

JOHANNESBURG (Reuters) - Foreign direct investment inflows into Africa fell in 2011 for the third consecutive year but could more than double by 2014, as stronger economic growth, ongoing reforms and high commodity prices improve investor perceptions, the United Nations said Thursday.

The decline in investment, from 43.1 billion USD in 2010 to 42.7 billion USD in 2011, was largely due to reduced inflows to North Africa as social and political unrest in Egypt and Libya deterred investors, according to the 2012 World Investment Report. Africa's share of global FDI also dropped from 3.3 percent in 2010 to 2.8 per cent in 2011.

However, inflows to sub-Saharan Africa jumped 25 per cent to 36.9 billion USD in 2011, close to its peak of 37.3 billion USD in 2008, as commodity-rich countries in west and central Africa saw a rise in new projects.

The report, published by the United Nations Conference on Trade and Development, said Africa's FDI prospects for 2012 were promising and forecast average flows of between 55 billion USD and 65 billion USD in 2012. It projected this would grow to 70-85 billion USD in 2013 and 75-100 billion USD in 2014.

"Inflows to Africa are expected to recover as a result of stronger economic growth, ongoing economic reforms and high commodity prices, as well as improving investor perceptions of the continent, mainly from other emerging markets," the report said.

For the first time, FDI inflows from developing economies into Africa, outstripped those from developed economies, the report showed.

"In terms of green field (new) projects, which account for over 90 per cent of total FDI, the largest developing-economy investors in 2011 were India, South Africa, China, Korea and Mauritius," said James Zhan, director of UNCTAD's investment and enterprise division.

Africa's emerging middle class has also spurred the growth of FDI in the services sector, though FDI to the extractive industries tends to attract more attention, Zhan said.

The study highlights the contrasting fortunes of North Africa, traditionally the recipient of a third of inward FDI to Africa, and the rest of the continent. Inflows to the region halved to 7.69 billion USD in 2011, dwarfed by the 16.1 billion USD investors poured into West Africa and the 8.53 billion USD into Central Africa.

According to EH, commodity-rich countries, such as Nigeria, Ghana, Congo, Equatorial Guinea and the Democratic Republic of Congo, attracted the bulk of FDI in their respective regions. Nigeria, Africa's top oil producer and most populous nation, received inflows of 8.92 billion USD, representing a fifth of all flows to the continent.

However, the report said new oil- and gas-producing countries such as Ghana, where commercial oil production started in December 2010, and Mozambique, where major discoveries of gas reserves are expected to transform the economy, should experience strong FDI growth in the future.