In a report issued by the United Nations Conference on Trade and Development (UNCTAD), Egypt has been ranked to be the highest foreign direct investment recipient (FDI) in Africa.
Egypt is reported to have received $5.5 billion in foreign direct investment in 2020, a 39% decline from the $7.6 billion received in 2019. Nigeria came in second having received $ 2.6 billion in 2020 a 27% decline from $3.3 billion that was acquired in 2019. Nigeria attributed the loss to lower crude oil prices coupled with the closure of oil development sites due to the onset of the covid-19 pandemic that resulted in restricted movement.
Effects of Covid-19 on Foreign Direct Investments
The Covid-19 pandemic weighed heavily on Foreign direct investment across the globe declining by 42%, from $1.5 trillion in 2019 to $859 billion in 2020 the UN attributed the loss mainly to developing countries.
In Africa, FDI declined by 18% to $38 billion in 2020 from $46 billion recorded in 2019. The pandemic’s negative impact was amplified by lower prices and lower demand for commodities. South Africa was greatly affected by the pandemic with inflows declining by almost half from $4.6 billion to $ 2.6 billion in 2020. However, the country is hopeful for an improvement with several large projects being implemented in 2021 including an investment by google of $ 140 million in fibre optics submarine cable and an additional $ 360 million investment by pepsico to expand the capacity of pioneer foods.
Despite the prevailing challenging conditions, Senegal recorded higher inflows in 2020, registering a 39% increase to $ 1.5 billion due to rising investments in energy. FDI inflows were also steady in Mozambique decreasing by only 6% to $ billion due to the implementation of the $ 20 billion LNG project led by Total.
The UN has said that global FDI is expected to remain weak in 2021 as investors are likely to remain cautious in committing capital to new overseas productive assets. The UN further stated that any increase in FDI is expected to come from cross-border mergers and acquisitions rather than new investments in productive assets.