Investors were forced to hold onto their cash last year due to uncertainties imposed by the COVID-19 pandemic which devastated big economies in Africa resulting in a decline in Foreign Direct Investments.
Investment Trends Monitor published by the United Nations Conference on Trade and Development (UNCTAD) shows that in 2020, Foreign Direct Investment (FDI) flows to Africa declined by 18%, to $38 billion dollars from $46 billion dollars recorded in 2019.
While 2020 statistics for East Africa’s biggest economy, Kenya, were not readily available, inflows to the country are expected to decrease further as a result of health protocols imposed last year which meant fewer new projects were announced and work commenced while others went into a freeze.
FDI inflows to Kenya decreased by 18% in 2019 to stand at Kshs. 143 billion ($1.3 billion) from an estimated Kshs. 176 billion ($1.6 billion) in 2018.
Announcement of new developments otherwise known as Greenfield projects fell to $28 billion, from $77 billion in 2019.
“The pandemic’s negative impact on FDI was amplified by low prices and low demand for commodities,” said the report.
In sub-Saharan Africa, flows declined by 11% to an estimated $28 billion.
Nigeria saw its inflows decrease by $700 million as Africa’s largest economy reported investments amounting to $2.6 billion compared to 2019.
Foreign investments in Nigeria were mainly hampered by lower crude oil prices, closure of oil development sites as the country activated movement restrictions in an effort to contain coronavirus.
South Africa on the other hand lost half of the inflows as FDI reduced to $2.5 billion compared to $4.6 billion registered in 2019 though $140 million Google investment in fibre optic marine cable and another $360 million by Pepsico to expand capacity of Pioneer Foods signaled lifted investment environment.
The report further indicates that Egypt which receives the largest share of investments in Africa saw Its FDI shrink 39% to an estimated $5.5 billion as North Africa flows also fell by 32% to $9.4 billion from $14 billion the previous year.