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AfricaEconomyZimbabwe

Sub-Saharan Africa first-half FDI inflows drops 21pct

By Almot Maqolo

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Foreign Direct Investment (FDI) Inflows to Sub-Saharan Africa declined by 21% to an estimated $12 billion in the first half of 2020, a new report shows.

In its latest Investment Trends Monitor report, the United Nations Conference on Trade and Development (UNCTAD) said inflows to Nigeria fell by 29% to $1.2 billion as the implementation of ongoing projects slowed down due to closures of sites in the oil and gas industry.

One of the major investments in Nigeria was in the non-oil economy, with China Communications Construction Co Ltd, acquiring a majority stake in Lekki Port Enterprise Ltd, a deep-sea freight transportation firm, for $233 million.

Inflows to Ethiopia were relatively stable, declining by only 12% to $1.1 billion. Asian giant China continues to be the biggest source of FDI to Ethiopia accounting for a quarter of newly approved projects in 2020.

FDI to Mozambique went down by 27% to $0.8 billion as the implementation of offshore gas projects slowed down due to the pandemic. Bucking the trend, FDI flows to Zimbabwe’s biggest trading partner South Africa rose 24% to $2.9 billion.

However, UNCTAD said, this increase was largely to intra-company transfers of foreign companies to their subsidiaries in the country rather than greenfield investment projects.

In March 2020, the government approved the deal by PepsiCo (USA) to acquire Pioneer Foods for a sum of $1.8 billion, one of PepsiCo’s largest foreign investments.

“This deal can be expected to add to inflows to the country when implemented, especially as further direct investment over the next five years has been stipulated in the investment agreement,” UNCTAD said.

Despite the 2020 drop, UNCTAD noted that, FDI remains the most important source of external finance for developing countries.

“Other sources, including remittances and official development assistance – relatively more important for least developed countries – are also falling,” it said. “The overall decline can add to external payments problems in developing countries.”


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