Current economic conditions, marked by trade and geopolitical tensions, have kept foreign direct investments (FDI) at a globally low level. A notable disparity is observed, with most African nations experiencing a drop in these financial flows in 2023. However, investments in clean energy show positive results.
Global FDI : Downward trend in 2023
Global FDI decreased by 2 % in 2023, reaching 1.3 trillion USD, primarily due to economic slowdowns and geopolitical tensions. Excluding significant investment fluctuations in Europe, this recession exceeds 10 %. Flows to developing countries dropped by 7 %, stabilizing at 867 billion USD. Concurrently, funding allocated to Sustainable Development Goals (SDGs) was reduced by 10 %, highlighting a notable decrease in resources for these global initiatives.
Tight financial conditions have reduced international deals by 26 %, impacting infrastructure development, especially in developing economies. Despite these challenges, prospects for 2024 show moderate growth, thanks to efforts to facilitate financial investments at both national and international levels. Increases are expected in several high-value-added manufacturing sectors such as automotive and electronics.
In 2023, 29 new international investment agreements (IIAs) were concluded, less than half of which are traditional bilateral treaties. The reform of older IIAs is progressing slowly. Half of global FDI remains governed by unreformed treaties, resulting in:
- Increased risk of investor-state disputes
- More significant impacts on developing countries and Least Developed Countries (LDCs)
African FDI : Major projects perception
In 2023, Africa experienced a 3 % decrease in foreign direct investments, totaling 53 billion USD. This trend is mainly attributed to the economic performances of Egypt and South Africa. International project financing agreements reached 64 billion USD, marking a 50 % drop compared to the previous year. The main investors on the continent, in terms of FDI stock, are the Netherlands, France, the United States, the United Kingdom, and China.
Despite this decline, Africa attracts a significant share of entirely new global megaprojects. Six of these projects are valued at over 5 billion USD, led by a green hydrogen project in Mauritania. According to the UN, this clean energy project is expected to generate 34 billion USD in investments, far exceeding the GDP of this least developed North-West African country.
Additionally, a commitment of over 10 billion USD in investment has been announced for wind and solar projects, primarily in Egypt, South Africa, and Zimbabwe. Electric vehicle value chains also attract investments, such as a battery plant in Morocco for 6.4 billion USD.
FDI trends by sub-region
According to the report, FDI inflows in North Africa registered a 12 % decrease. This recession is mainly due to a decline in mergers and acquisitions in Egypt and Morocco. However, the kingdom still attracted significant new projects. Meanwhile, the western region recorded a slight 1 % decrease but with disparate fluctuations. The green hydrogen program in Mauritania significantly influenced this result due to its substantial volume. Even without this program, new projects tripled in value and remained stable in number.
FDI inflows in Central Africa also declined by 17 % due to a drop in international project financing. However, new projects saw a 56 % increase in number and a 119 % increase in value. East Africa experienced a 3 % decrease in FDI, largely due to an 11 % decline in Ethiopia. Conversely, this region recorded a more than 30 % increase in its international project financing operations.
Fluctuations in Angola continue to influence trends in Southern Africa. In contrast, incoming flows in South Africa dropped by 43 % despite progress in mergers and acquisitions. Compared to 2018, foreign direct investments increased in all major regional groupings on the continent.
The reduction in FDI to Africa is not due to investment policies. Developing countries are taking numerous measures to attract investments. In 2023, 86 % of investment policies in these countries were favorable to investors. Conversely, developed countries have introduced more investment restrictions, with 57 % of policies being less favorable to investors.
