FDI IN AFRICA, 2004

FDI flows to Africa in 2004 remained relatively high, matching the $18bn in 2003, which was itself a 39% increase over 2002.

Higher prices of minerals such as gold, copper, diamonds, platinum and particularly oil - along with improved profitability of investment in natural resources - encouraged

Another important factor was trans-border mergers and acquisitions (MSAs) in the mining industry, which increased their 2003 value by about three times.

Inflows rose in 40 out of 53 countries and fell in 13. Some of these were Africa's usually top recipients of FDI - Angola, Nigeria and Morocco.

The five top home countries of FDI for Africa in 2004 were France, the Netherlands, South Africa, UK and US. Together they accounted for well over half the FDI to the region.

Africa's share of world FDI was only 3% in 2004. Over the past 10 years, this share has risen by only one percentage point. On a per capita basis, FDI inflows rose from $8 in 1995 to $20 in 2004 - compared to China which stood at $46 in 2004.

FDI flows accounted for 5.5% of Africa's gross fixed capital formation in 2004.

Among the sub-regions, North Africa attracted the highest inflows (29%) with all the countries (except Libya) in the sub-region (Morocco, Tunisia, Algeria, Egypt, Sudan) on the list of the top 10 host countries for African FDI. Sudan ($1.5bn) attracted the most FDI for North Africa mainly as a result of investment in petroleum from China, India and Malaysia. Most of the investment went into oil and gas.

Rising oil prices contributed to relatively high levels of FDI inflows to the major oil producing African countries, especially Sudan and Equatorial Guinea. Although FDI inflows decreased in Angola and Nigeria, the levels remained high in those two countries. These four countries, together with Egypt, were the top recipients of FDI to Africa in 2004. Their combined total amounted to $8.6bn, a little under 50% of Africa's total flows.

The composition of FDI inflows to Africa, as in 2003, was heavily tilted towards natural resources, particularly in the petroleum industry. The share of this industry exceeded 60% of total inflows to Angola, Egypt, Equatorial Guinea and Nigeria.

In South Africa, a major transaction in the oil industry dominated FDI inflows in 2004 when Tullow Oil of the UK merged with Energy Africa resulting in a $0.5bn investment.

In some countries, efforts to diversify the economy by opening up new industries to foreign participation are beginning to pay off. In 2004, there were sizeable investments in the telecoms industry in Algeria; a 16% stake of Maroc Telecom (MT) was sold to Vivendi; in Egypt, privatisation has prompted FDI in a range of industries such as cement, telecoms and tourism; in Sudan FDI from China was expected for the building of a new power plant and a refinery north of Khartoum and for refurbishing the long-neglected railway system, in Tunisia, FDI in the manufacturing industry constitutes 39% of total inflows to the country.

AFRICAN FDI OUTFLOWS

FDI outflows from Africa more than doubled to $2.8bn in 2004. About 57% of this was the result of cross-border acquisitions by TNCs from South Africa. For example: AngloGold (South Africa) purchased Ashanti Goldfields (Ghana) which has major FDI projects in Guinea, Tanzania and Zimbabwe; Gold Fields of South Africa also acquired IAMGOLD of Canada and Allied Technologies of South Africa acquired the Econet Wireless Group of Botswana.

TNCs from other African countries are also investing within and outside the region: Orascom Telecoms Holding (Egypt) has expanded operations into Iraq and Oriental Resources of Nigeria has expanded in Chad.

Algeria, Egypt, Nigeria and South Africa accounted for 81% of outflows from Africa in 2004.