International capital flows
Foreign direct investment by African countries
Outward foreign direct investment from African countries
Authors:
S. Page; D.W. te Velde
Publisher:
Overseas Development Institute, London, 2005
Foreign Direct Investment (FDI) from developing countries has risen sharply over the past two decades. Most FDI has been by Asian firms establishing footholds in other Asian countries but there has also been investment in developed countries such as the European Union. However, with the exception of South African investment, there is little FDI stemming from Sub-Saharan Africa. African investment is still only 0.2 per cent of the total, and only about 3 per cent of total developing country foreign investment. This paper pulls together what is known about African outward FDI, distinguishing between intra Africa outward FDI and African outward FDI to outside the region. The paper:
- discusses various motives suggested by theoretical analysis of the reasons for investing abroad
- presents data and some case studies on total African investment
- describes African investment within Africa, analysing whether the explanations suggested by theory seem to apply - with a focus on Botswana, Ethiopia, Malawi, Mauritius, and South Africa.
The paper concludes that:
- while there are relatively good data for aggregated outflows, there is no systematic coverage of outward FDI by country, except in the case of South Africa and Mauritius
- only a few countries are major investors at regional level, and only South Africa is significant outside Africa
- African outward FDI does play a significant role in some other African countries, predominantly in Southern African countries where South African FDI is responsible for up to 60-80% of total FDI inflows
- Non-South African FDI outside the continent is small and insignificant even to individual countries
- within Africa there are many investment links, .g. Mauritius in Tanzania, Madagascar, and Mozambique; Kenya in Tanzania and Uganda; Ghana in Tanzania; Zimbabwe in Mozambique. Of these, Kenya’s role in East Africa is the most important, after South Africa’s impact
