Africa still an attractive FDI investment destination
Despite numerous development challenges, Africa’s currency and commodities market still remains an attractive investment sector.
According to a 2013 World Investment report on Investment and Trade for Development, foreign direct investment (FDI) flows to Africa increased by 5 per cent to 50 billion dollars in 2012, even though global FDI fell by 18 per cent.
FDI flows to North Africa increased by 35 per cent to 11.5 billion dollars in 2012 and flows to West Africa declined by 5 per cent to 16.8 billion dollars.
Central Africa FDI increased to 10 billion dollars but flows to Southern Africa fell sharply from 8.7 billion dollars in 2011 to 5.4 billion in 2012. East Africa FDI grew from 4.5 billion dollars in 2011 to 6.3 billion in 2012.
The continent’s commodities and currency market in particular provides room for overseas investors to diversify portfolios and participate in the emerging market boom.
Six out of ten of the world’s fastest growing economies are currently in Africa, with the continent having enjoyed a 6.6 per cent growth in GDP in 2012.
While Africa still has a number of infrastructural and development challenges, the continent’s more developed countries, such as Mauritius, act as a conduit into Africa.
“It’s a land of opportunities, and Mauritius had a 20-year experience of channelling investments to emerging nations, India in particular, but lots of South East Asian companies. Africa is also part of it but for the moment, it occupies only about 15 to 20 per cent of Mauritian trade in global business,” International Financial Services (IFS) director Couldip Basanta Lala told CNBC Africa on Thursday.
“IFS has more Indian investments so far but a sizeable amount of funds that go into Africa are channelled through Mauritius, and about 40 per cent of African funds are domiciled in Mauritius.”
The IFS currently has 65 billion dollars under administration, with large investors from the United States and Europe, who are targeting emerging markets as part of their investment mandate.
Mauritius has been dubbed the conduit into Africa because of its robust financial services sector and strong links with the international community through its tourism industry.
According to Lala, the island’s economy is becoming a key channel for investment, as a number of African economies remain significantly underdeveloped. Few are able to offer investors the option to trade financial derivatives, among others.