- Despite a decline in Foreign Direct Investment (FDI) in Africa due to electricity crises and exchange rate misalignment, the African Development Bank’s January 2024 report highlights a positive trend: a 39 per cent increase in the number of new projects announced in 2022, reaching 766, signalling improved investment conditions across the continent.
- Africa played a crucial role in major greenfield investment megaprojects in 2022, representing 40 per cent of the total. These projects, valued at over $10 billion each, have the potential to generate jobs, boost capacity, and facilitate technology transfer.
In its January 2024 report on Africa’s economic performance and macroeconomic outlook, released February 16, 2024, the African Development Bank highlighted some noteworthy trends. Despite a decrease in Foreign Direct Investment (FDI) in Africa, attributed to issues like electricity crises and exchange rate misalignment in major economies such as Nigeria and South Africa, there was a positive development.
The number of new projects announced increased by 39 per cent, reaching a total of 766, indicating an improvement in investment conditions across the continent. Africa played a significant role in the announcement of major greenfield investment megaprojects (each worth over $10 billion) in 2022, accounting for 40 per cent of the total.
These mega projects have the potential to create jobs, enhance capacity, and facilitate technology transfer. The energy sector, encompassing both extractive industries and energy generation, experienced the most substantial growth.
Africa possesses valuable natural resources, including a quarter of the world’s arable agricultural area, the second-largest and longest rivers (the Nile and the Congo), and abundant forest resources. Additionally, approximately 30 per cent of global mineral reserves are found in Africa, with significant percentages for gold, cobalt, and platinum group metals.
Going forward
To diversify and enhance economic prospects, Africa must focus on industrialization, adding value through processing and transforming raw materials, and engaging in agribusiness and climate-smart activities. Creating connections between the extractive industry and other manufacturing sectors can support the production of inputs and services, meeting the demands of extractive industries.
The establishment of special agro-industrial processing zones is another strategy to transform agriculture into a high-value-added industry, benefiting various stages of the agricultural value chain. The report also addressed Africa’s current account deficit, which slightly widened from 1.5 per cent of GDP in 2022 to an estimated 2 per cent in 2023, driven by an increase in imports relative to exports.
Oil-exporting economies experienced a reduction in current account surpluses due to lower oil prices and weakened global demand. Looking ahead, Africa’s external deficit is projected to widen in 2024 before stabilizing in 2025.
This projection is influenced by expectations of elevated oil prices, which may negatively impact net oil-importing economies. The report emphasizes the importance of policies that attract FDI to foster sustainable and inclusive growth.