Foreign direct investment in Africa from oil companies hit $ 36 bn

Oct 26, 2007 02:00 AM

The World Investment Report (WIR) 2006 has said that flow of Foreign Direct Investment (FDI) into Africa from transnational corporations (TNCs), extractive industries and development, increased to $ 35.5 bn in 2006 alone, from $ 29.6 bn in the preceding year. The figure doubled that of the FDI flow in 2004, which stood at $ 18 bn.
The WIR 2007, which was launched by the Nigeria Investment Promotion Commission (NIPC), attributed the upward trend to "increased interest in natural resources, improved prospects for corporate profits and a more favourable business climate."

The report also pointed out that the value of cross-border mergers and acquisitions (M and A) sales reached a record of $ 18 bn, half of which represented purchases by TNCs from developing Asia. According to the report, greenfield projects and investment in expansion, which are new projects and investments, also grew significantly.
However, despite these increases, the WIR put together by the United Nations Conference on Trade and Development (UNCTAD) stated that Africa's share in global FDI fell to 2.7 % in the year under review, compared to 3.1 % in 2005. This, it noted, was much lower than that of other developing regions. The global FDI stood at $ 1.3 tn in 2006. On the other hand, the WIR stated, FDI outflows from Africa hit a record $ 8.2 bn in 2006, up from $ 2.3 bn in the preceding year.

Noting that, "FDI inflows rose in 33 African countries and in all sub regions except for southern Africa," the report revealed that, "the top 10 host African countries received about 90 % of such flows."
According to the WIR, in eight of them, inflows exceeded $ 1 bn each. Large cross border M and As, as well as greenfield investments and expansion projects played an important role in the top host countries, particularly Egypt and Nigeria.

"In Egypt, leading recipient in the region, inflows exceeded $ 10 bn, 80 % of which were in expansion and Greenfield projects in the non-oil activities. South Africa witnessed a major decline in inflows due to the sale of a foreign equity stake in a domestic gold mining company to a local firm, but it generated most of the outflows from Africa."
Meanwhile, the UNCTAD's WIR disclosed that the search for new natural resource reserves led to increased FDI to African least developed countries (LDCs), amounting to $ 8 bn, following two consecutive years of decline.

Source / This Day
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