Global tensions have had a notable impact on foreign direct investment globally, the United Nations Conference on Trade and Development (UNCTAD) said in a report, with developed economies seeing a significant increase while developing economies saw a slump.
According to the October issue of the Investment Trends Monitor, released on Monday, developing economies saw FDI decline by two percent year on year in the first half of 2019.
FDI flows to Africa are estimated at $23 billion in the same period, also a decline of 2 percent, due to subdued global economic growth, persistent trade tensions and political instability in some African countries, according to the report.
Africa FDI flows have declined “despite the [African Continental Free Trade Agreement] AfCFTA coming into force,” the report noted.
East, West, and Southern Africa saw increases in FDI flows, while Central and North Africa had lower inflows year on year.
FDI flows to South Africa dropped from $4 billion in the first half of last year to $2.6 billion in the first half of this year 2019.
Ethiopia saw a 20 percent decline in FDI flow, while Uganda saw a 75 percent increase “due to increased Chinese investments and Uganda’s progress in the oil field,” the report said.
Egypt continues to be the largest recipient of FDI flows on the continent, receiving $3.6 billion thanks to new investments deal which have been announced, the report said.
Nigeria, the largest economy in Africa, has seen FDI pick up significantly in the same period, driven by reforms to oil and gas companies, including lowering mandatory public ownership requirements.
Developed economies see rebound
On the other hand, FDI flows to developed economies were $269 billion in the first half of 2019, almost double the $139 billion in the same period last year.
However, the report described the “rebound” from last year’s collapse as low “compared to historical levels.”
FDI into these economies averaged more than $400 billion in the first half of the year in during the five-year period before 2018’s collapse, the report said.