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Egypt is the second largest recipient of foreign direct investment in Africa


Written by Frédéric Dubessy on Tuesday, June 14th 2022 à 11:10 | Read 383 times



FDI has increased by 52% in Morocco (photo: F.Dubessy)
FDI has increased by 52% in Morocco (photo: F.Dubessy)
AFRICA. According to a report entitled "International Tax Reforms and Sustainable Investment"  (United Nations Conference on Trade and Development), published on Thursday 9 June 2022, foreign direct investment (FDI) flows have increased by 134% in developed economies, but only by 30% in developing ones. Even though they represent, at $837bn (€788bn), the highest level ever recorded. The major contribution came from Asia, but also from a partial recovery in Latin America and the Caribbean, as well as a revival of activity in Africa.

"Last year, global foreign direct investment flows returned to their pre-pandemic levels, reaching $1,600bn (€1507bn). Cross-border transactions and international project finance were particularly strong, encouraged by flexible financing conditions and infrastructure stimulus packages. However, the recovery in new investment in industry remains fragile, particularly in developing countries," commented UN Secretary-General Antonio Guterres. The 244-page UNCTAD report stresses that "it is unlikely that this trend will continue in 2022".

The war in Ukraine, which has led to high food and fuel prices and a tightening of financing, is obviously to blame. "Other factors clouding the FDI horizon include further impacts of pandemics, the likelihood of further interest rate hikes in major economies, negative sentiment in financial markets and a potential recession," the report says. In the first quarter of 2022, FDI fell by 21% globally.

FDI down 5% in North Africa

In African countries, FDI reached $83 billion (€78 billion) in 2021. A record figure to be put into perspective however. This sum only corresponds to 5.2% of FDI in the world, against 4.1% in 2020. Moreover, it "has been considerably affected by a single intra-company financial transaction in South Africa in the second half of 2021", which represents 45% of the total, says the UNCTAD. Excluding this share swap between internet groups Naspers and Prosus in the third quarter of 2021, the increase in Africa is moderate and more in line with other developing regions.

The continent saw flows increase in most of its sub-regions (Southern Africa, East Africa, West Africa), remain stable but decline in North Africa by 5% to $9.3bn (€8.76bn).

The situation remains disparate in this part of the world with a 52% increase in FDI in Morocco in 2021 ($2.2bn - €2.07bn) and a 12% fall in Egypt due to the non-repetition of large investments in exploration and production agreements in the extractive industries.

But with $5.12bn (€4.82bn) raised, the latter country remains the second largest recipient of FDI in Africa (followed by Mozambique with $5.10bn) far behind South Africa and its estimated $40.88bn (€38.51bn). Egypt's future seems to be brightening with the announcement of entirely new projects for $5.6bn (€5.28bn) in 2021, i.e. three times the 2020 figure. Moreover, it is registering several pledges from Gulf States for investments of around $22bn (€20.72bn) in total in various economic sectors. With, for example, a $1.5bn (€1.41bn) real estate project led by Reportage Properties (United Arab Emirates).

Egypt accounts for 25% of hotel development projects on the African continent

France, second investor in Africa

In Africa, the new international projects announced in 2021 only amount to $39 billion against $32 billion in 2020, at the height of the pandemic. They were $77bn (€72.53bn) in 2019.

Those in renewable energies are progressing significantly, rising from thirty-six in 2011 to seventy-one in 2021.
In Morocco, the British company Xlinks is going to commit $20 billion (€18.84 billion) to a 3.6 GW capacity line for the supply of solar and wind energy from Morocco to the United Kingdom via 3,800 km of submarine cables.

"In the long term, the African continent has great potential to attract international investment in the green and blue economies, as well as in infrastructure," says James Zhan. For the Director of UNCTAD's Division on Investment and Enterprise, "the challenge is to further improve the business climate and enhance Africa's capacity to absorb these sustainable investments."

The largest holders of foreign assets in Africa are European, led by the UK ($65bn - €61.23bn) and France ($60bn - €56.52bn).

Read the UNCTAD report "International Tax Reforms and Sustainable Investment" 

Les IDE entrants en Méditerranée
 
Pays IDE 2021 (en M$)
Albania 1234
Algeria 870
Bosnia and Herzegovina 519
Croatia 569
Cyprus 463
Egypt 5 122
Spain 9 777
France 14 193
Greece 5 732
Italy 8 487
Israel 3 000
Jordan 622
Lebanon 273 (estimation)
Libya nc
Northern Macedonia 606
Malta 4 005
Morocco 2 153
Montenegro 664
Palestine 256
Portugal 8020
Serbia 4 563
Slovenia 1 517
Syria nc
Tunisia 660
Turkey 12 530

Source: UNCTAD 2022 Report "International Tax Reforms and Sustainable Investment



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