Although 2020 witnessed unprecedented outflows of foreign direct investments due to the uncertainties created by Covid-19, 2021 looks promising with projections of significant volumes of FDI returning to emerging markets in Africa.
According to Faizal Bhana, director of Jersey Finance in the Middle East and Africa, the African continent remains a highly attractive market, particularly for inbound investment.
“In recent years, Africa escaped the global decline in foreign direct investment as flows to the continent rose to Ksh4.6 trillion ($41.82 billion, an increase of 11 per cent on the previous year according to the UNCTAD’s World Investment Report of 2019,” said Mr Bhana.
Just last month, the CDC Group, the UK’s impact investor and development finance institution, announced a commitment to invest over $1 billion in African businesses by the end of 2021.
The funds will be invested in key sectors such as education, healthcare, finance, infrastructure, manufacturing, agriculture, and technology, where the returns and potential are higher than in more mature markets.
The CDC Group, alongside a consortium of other development finance institutions and impact investors, including Norfund, Finnfund, FinDev Canada and BIO, also recently announced a Ksh8.2 billion ($74.5 million) commitment to Phatisa Food Fund 2, set up to finance agricultural activities.
The fund will invest in mechanisation, inputs, poultry and meat production, food processing and manufacturing, logistics, aggregation and distribution across sub-Saharan Africa. The investment will strengthen and increase food supply, local production and distribution across the region.
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Phatisa Food Fund 2 targets over 90,000 smallholder farmers and micro-entrepreneurs and aims to create over 2,000 permanent jobs and sustain another 10,000 jobs.
Mr Bhana says that though investments will still go to previously regional stronghold areas such as agriculture, focus is bound to switch to technology.
“Fintech has come to the fore allowing businesses and individuals to transact and carry on with life and day-to-day activities. As we expect this sector to innovate and grow significantly this year, we also expect to see a lot of international collaboration in this area,” Mr Bhana added.
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