Victoria Falls – Foreign direct investment to Southern Africa declined in 2020, mainly due to COVID-19’s global economic impact.
Data from the World Investment Report 2021 released by the United Nations Conference on Trade and Development show that FDI to Southern Africa decreased by 16 percent to US$4.3 billion in 2020, with Mozambique and South Africa accounting for most inflows.
“Inflows were steady in Mozambique, increasing by six percent to US$2.3 billion. The implementation of the US$20 billion investment led by Total (France) in the liquefied natural gas project in the country slowed but continued, despite the pandemic and other challenges,” reads part of the report.
The report said FDI to South Africa decreased by 39 percent to US$3.1 billion last year.
“South Africa has borne high human and economic costs due to the pandemic, and the country’s GDP is estimated to have dropped by eight percent in 2020. Cross-border (mergers and acquistioins) in South Africa dipped significantly (by 52 percent to US$2.2 billion) but still accounted for a large part of total inflows,” UNCTAD said.
According to the report, FDI inflows to Africa south of the Sahara decreased by 12 percent to US$30 billion, with investment growing in only a few countries.
UNCTAD forecasts FDI into Africa to grow in 2021, though tepid economic recovery and slow vaccine roll-outs threaten the scale of the investment recovery.
“FDI to the continent is projected to grow by only five percent in 2021, lower than both the global and developing country projected growth rates,” the report noted, adding that, “Despite projections for only a weak investment recovery in 2021, there are some mitigating factors that signal FDI picking up momentum by 2022 and returning to pre-pandemic levels.”The report highlighted that factors spurring FDI in 2022 included an expected rise in demand for commodities, especially in the energy sector as the global economy picks up steam in the second half of 2021; reconfiguration of global value chains and the increasing importance of regional value chains will open new opportunities for African countries; implementation of key projects announced in 2021 and earlier, including those that were delayed due to the pandemic; and finalisation of the African Continental Free Trade Area Sustainable Investment Protocol.