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Foreign Direct Investment in Africa: Recent Trends Leading up to the African Continental Free Trade Area (AfCFTA)

Author

Listed:
  • Morgan, Stephen
  • Farris, Jarrad
  • Johnson, Michael E.

Abstract

The African Continental Free Trade Area (AfCFTA) connects 1.3 billion people across 55 countries and presents a significant opportunity for increased economic growth in Africa. AfCFTA may also spur increases in foreign direct investment (FDI) on the continent by reducing regulatory barriers and expanding market access. This report examines emerging trends in FDI in Africa that may further shift under AfCFTA. Particular attention is given to assessing the sources and destinations of private investment in Africa and sectoral investment patterns. European investors remain the most important source of FDI stock in Africa, but the relative share of Africa’s FDI stock originating from Europe declined over the past decade, while Asia’s share increased. The destinations of FDI in Africa also shifted, with Northern and Southern Africa—which made up the majority of FDI stock in the mid-2000s—losing FDI share to Eastern Africa. Additionally, industries related to natural resource extraction that once dominated the sectoral composition of newly created subsidiaries in Africa made up less than one-third of greenfield FDI in Africa in 2016–20.

Suggested Citation

  • Morgan, Stephen & Farris, Jarrad & Johnson, Michael E., 2022. "Foreign Direct Investment in Africa: Recent Trends Leading up to the African Continental Free Trade Area (AfCFTA)," USDA Miscellaneous 329077, United States Department of Agriculture.
    • Handle: RePEc:ags:usdami:329077
    DOI: 10.22004/ag.econ.329077
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    Financial Economics; International Development; International Relations/Trade; Political Economy; Resource /Energy Economics and Policy;
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