The trend of declining foreign direct investment (FDI) to Africa is set to exacerbate significantly in 2020 amid the dual shock of the coronavirus pandemic and low prices of commodities, especially oil.
FDI flows to the continent are forecast to contract between 25% and 40% based on gross domestic product (GDP) growth projections as well as a range of investment specific factors, according to UNCTAD’s World Investment Report 2020.
“Although all industries are set to be affected, several services industries including aviation, hospitality, tourism and leisure are hit hard, a trend likely to persist for some time in the future,” said UNCTAD’s director of investment and enterprise, James Zhan.
Manufacturing industries intensive in global value chains are also strongly affected, a sign of concern for efforts to promote economic diversification and industrialization in Africa.
Overall, there is a strong downward trend in the first quarter of 2020 for announced greenfield investment projects, although the value of projects (-58%) has dropped more severely than their number (-23%).
Similarly, as of April 2020, the number of cross-border merger and acquisition (M&A) projects targeting Africa had declined 72% from the monthly average of 2019.