2014 Africa attractiveness survey reveals a dramatic
improvement in the continent’s perceived attractiveness, now at second
place, and although FDI numbers paint a mixed picture, companies are
successfully growing in Africa.
Good progress, despite the setbacks
FDI in 2013
In 2013, Africa’s share of global FDI projects reached 5.7%, its
highest level in a decade. The number of new FDI projects in sub-Saharan
Africa (SSA) increased by 4.7%, although the total number of new FDI
projects declined by 3.1%, due to the political uncertainty in North
Africa. However, the average size of FDI projects increased to US$70.1m
in 2013, from US$60.1m in 2012. In terms of destinations, while South
Africa maintained its position as the top FDI destination, emerging
hotspots for investment are Kenya, Ghana, Mozambique, Uganda, Tanzania
and Zambia.
Three key trends
In previous editions of the Africa attractiveness survey, we have
highlighted three broad shifts. These continued to gain traction in
2013:
 | the growth of investment into SSA, | |
| | the expansion of intra-African investment, | |
| | the shift of investment from extractive to consumer-facing sectors |
The prime factors behind the sub-Saharan African growth story are
strong macroeconomic growth and outlook, improving business environment,
rising consumer class, abundant natural resources, democratic dividend
and infrastructure development.
African investors nearly tripled
their share of FDI projects over the last decade, and Intra-African
investment has also driven job creation on the continent. This growth is
fueled by the need for improved regional value chains and strengthening
regional integration.
With the diversification of economic
activity in Africa gathering pace, growing employment levels are
creating a new consumer class. This has paved the way for increasing FDI
in consumer-focused services and manufacturing sectors. Sectors other
than extractive industries are growing in importance.
Giant leap in Africa's relative attractiveness
Steadily moving ahead
The most striking observation from this year’s survey is how far
Africa’s perceived attractiveness has improved. In less than five years,
Africa has risen to become the second most attractive investment
destination in the world, tied with Asia.
South Africa, Nigeria
and Kenya are considered the most attractive investment destinations in
SSA, whereas Morocco is seen as the leading destination for doing
business in North Africa, largely on account of its relatively stable
political environment.
A stark perception gap remains
However, the perception gap between those already doing business on the
continent, and those with no business presence, remains striking.
More specifically, those already active on the continent rank it as by
far the most attractive investment destination in the world today. Those
who are yet to invest are far less enthusiastic, ranking Africa as the
least attractive investment destination in the world. The gap could
hardly be wider.
Even though investment perceptions have improved
so dramatically, actual investment in Africa has not accelerated as
much, since many potential foreign investors continue to view the entire
continent as a high-risk destination.
This view is often based
on perceptions that are 20 to 30 years out of date. But it is important
to highlight the real challenges of doing business on the continent.
Africa is an inherently challenging place to do business, but many
companies pursuing a long-term African strategy have generated excellent
returns from their investments.
Successfully executing growth strategies in Africa
Some of the world’s largest and most-admired companies, emerging
multinationals and regional growth companies are successfully executing
growth strategies in Africa. This should instill confidence in the
potential of Africa’s growing markets.
EY’s 7-P model
We have captured the lessons these companies have learned in the form
of the 7 Ps framework. This can assist businesses in their
decision-making on, and in their responses to, the factors that are the
most critical to effective strategy execution.
This is not
offered as a recipe for success — there is clearly no such thing.
However, a focus on these factors has been consistently evident in
strategies that have been successfully, and sustainably, executed over
time in Africa.
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