Data from the EY Africa Attractiveness Report reveals that 2022 witnessed a significant rebound in foreign direct investment (FDI) into Africa, with the cleantech sector emerging as the leading driver of FDIs. The report also indicates that African governments need to implement various reforms to attract the next generation of critically needed FDIs. In an interview with CNBC Africa, Damilola Aloba, a partner at Ernst & Young, discussed the key findings of the report and offered insights into how Africa can make the most of the attention it is currently receiving.

Aloba highlights the challenges faced by FDI in Africa, citing global shocks such as the COVID-19 pandemic and the Russia-Ukraine war. These shocks dampened investor confidence and made them cautious about committing capital to African markets. Travel restrictions and disruptions in the global supply chain further worsened the situation, impeding investment processes and causing vulnerabilities in sectors like tourism, hospitality, and manufacturing.

Looking into the future, Aloba emphasizes the importance of Africa pivoting to sectors like cleantech to attract more FDIs. The continent is already gaining attention in emerging industries such as the electric vehicle space and minerals. To make the most of this attention, Africa needs to have investor-friendly policies, accelerate reforms, develop technology and infrastructure capacity, invest in skills development, and prudently manage public finances. These measures, along with economic diversification, will accelerate FDI inflows into African countries.

Aloba addresses the issue of countries like Nigeria that still heavily depend on extractive industries. He states that Nigeria’s current government is focusing on policies and initiatives aimed at attracting investments into the mining industry. The country’s oil and gas sector, which falls under the extractive industry, has faced challenges in recent years, but it has started to recover. Aloba suggests that Nigeria should also focus on producing materials for electric vehicles and explore the lithium space, which is already attracting significant investments. By playing a critical role in the cleantech sector, Nigeria can ramp up FDI inflows.

The report highlights the strong rebound of FDIs into Africa in 2022, driven by the cleantech sector. To attract the next generation of critically needed FDIs, African governments need to implement investor-friendly policies, develop technology and infrastructure capacity, invest in skills development, and prudently manage public finances. Economic diversification will also play a crucial role in accelerating FDI inflows. Nigeria, in particular, can leverage its focus on extractive industries by expanding into clean technology and attracting investments in the mining industry, electric vehicle materials, and the lithium space. These measures will enhance Africa’s attractiveness to investors and contribute to the continent’s economic growth and development.