While overall foreign direct investment (FDI) into Africa dipped slightly in 2023, a surge in clean energy projects is painting a brighter picture for the continent’s sustainable future, according to the latest World Investment Report by the United Nations Conference on Trade and Development (UNCTAD).
The report highlights a 3% decline in FDI inflows to Africa, reaching $53 billion in 2023. This decrease is primarily attributed to two of the continent’s leading recipient economies – Egypt and South Africa. However, a significant rise in greenfield investments, signifying entirely new ventures, specifically within the clean energy sector, offers a beacon of hope.
West Africa witnessed a marginal 1% drop in FDI, though individual countries displayed varying trends. Notably, the colossal $34 billion green hydrogen project in Mauritania significantly influenced the region’s greenfield investment value. Even excluding this outlier, the value of greenfield projects tripled, showcasing a broader commitment to clean energy across the region.
Central Africa, despite a positive 56% increase in the number of greenfield projects and a staggering 119% rise in their value, experienced a 17% decline in FDI due to a downturn in international project finance deals. This highlights the need for a more robust financing ecosystem to support the burgeoning green initiatives in the region.
East Africa mirrored the continent-wide trend with a 3% decrease in FDI inflows, largely due to an 11% decline in Ethiopia. This underscores the importance of economic diversification and fostering an attractive investment climate across the region.
The report emphasizes several noteworthy clean energy projects attracting significant foreign investment. Topping the list is the aforementioned green hydrogen project in Mauritania, a least developed country, with an investment value exceeding the nation’s entire GDP. This project has the potential to be a game-changer, not only for Mauritania but for the entire continent’s energy landscape.
Furthermore, over $10 billion in project finance poured into wind and solar power generation across Africa, with Egypt, South Africa, and Zimbabwe leading the charge. This substantial investment signifies a crucial step towards a more sustainable and climate-resilient energy future for the continent.
The burgeoning electric vehicle industry is also attracting foreign capital. Morocco, for instance, secured a significant investment deal for a $6. 4 billion electric vehicle battery manufacturing facility. This project positions Morocco as a key player in the burgeoning African electric vehicle market, fostering regional development and environmental benefits.
The UNCTAD report underscores a pivotal shift in Africa’s investment landscape. While overall FDI may have dipped slightly, the surge in clean energy projects demonstrates a growing international recognition of the continent’s vast renewable energy potential. This trend, if nurtured effectively, has the potential to propel Africa towards a sustainable and prosperous future.
