China rises to top of African FDI league


After a decade of economic and political engagement with Africa, China’s significance as an influencer and investor on the continent is in little doubt.

However, until now the predominance of Chinese investments in infrastructure and other broader forms of capital injection had seen the country under-represented as a greenfield investor in the continent. This appears to be changing, according to annual figures from fDi Markets, a Financial Times service that tracks greenfield foreign direct investment.

While the US remains the most prolific investor into Africa when measured by the number of greenfield projects, China has surpassed it in terms of the volume of investment, the first time since fDi Markets’ records began in 2003.

“China’s rise to the top spot . . . comes because its investors have excelled in the areas that took the lion’s share of overall investment into the region in 2016: notably, construction and real estate,” commented Adrienne Klasa, editor of FT specialist publication This Is Africa and of a report recapping last year’s Africa investment trends.

However, Chinese investment was somewhat inflated by announced megaprojects, including China Fortune Land’s planned $20bn investment to help build Egypt’s new administrative capital, a project that has had many fits and starts since its inception and over which terms are still being negotiated.

Top investing countries in Africa by capital expenditure, 2017
Country Share (%) Capex ($bn)*
China 39 36.1
UAE 12 11
Morocco 5 4.8
Italy 4 4
Saudi Arabia 4 3.8
US 4 3.4
Singapore 4 3.2
Japan 3 3.1
Malaysia 3 2.5
UK 3 2.3
Other 20 18.1

Source: fDi Markets/The Africa Investment Report 2017
*includes estimates; announced as well as launched investments

Real estate was the top sector by capital investment in Africa in 2016, accounting for $36.5bn (or 40 per cent) of announced greenfield FDI in the region; construction was the top business activity by capital investment, also accounting for 40 per cent. Combined, construction and manufacturing accounted for almost two-thirds of total capital investment.

While the number of new greenfield FDI projects announced or launched in Africa fell in 2016, total capital invested rose 40 per cent. This may in part reflect some recovery in energy and mining prices globally, leaving companies in these sectors with the ability to spend again, but there has also been an acceleration of capital flowing into other types of investments.

Foreign investors are gradually diversifying their interests away from traditional energy and extractives sectors and responding to growth opportunities sparked by Africa’s rapidly growing and fast urbanising populations.

Africa’s population totals 1.2bn and is forecast to more than double to 2.45bn by 2050. Population growth and urbanisation are key drivers in the development of real estate across Africa.

“If you had to identify the single most important reason to be bullish on Africa’s prospects in the 21st century, it would have to be rapid urbanisation, of which the new data are a telling indicator,” Rosa Whitaker, president and chief executive of Africa-focused advisory firm The Whitaker Group, wrote in the report.

This trend shows little sign of abating, and deep-pocketed Chinese developers are certain to continue stepping in to help build the houses and amenities Africa’s booming cities will require.

Courtney Fingar is head of content for fDi Intelligence, an FT data division.