Uganda in top 10 African countries that attracted most FDI in 2023

 While the clean energy sector draws significant global foreign investment to Africa, particularly green hydrogen, solar, wind, and battery manufacturing, this is not Africa’s only drawcard. Rapid economic growth and a fast-growing, youthful population are also driving investment in the continent. Here, bird story agency looks at the 10 countries that drew the most foreign direct investment (FDI) in 2023.

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While the clean energy sector draws significant global foreign investment to Africa, particularly green hydrogen, solar, wind, and battery manufacturing, this is not Africa’s only drawcard. Rapid economic growth and a fast-growing, youthful population are also driving investment in the continent.

A new report shows sustained foreign investor interest in the continent’s clean energy sector, despite a 3% drop in overall FDI inflows to the continent, echoing a global 2% decline.

Foreign investment in Africa’s clean energy sector remained robust in 2023, fueling the continent’s growing sustainability momentum, according to the report.

The report, ‘The World Investment Report by the UN Trade and Development,’ unveiled on June 20, shows a growing share of global greenfield megaprojects, particularly in clean energy, announced in Africa in 2023.

This is despite overall FDI inflows into the continent falling by 3% to US$53 billion, consistent with global trends where FDIs declined by 2% to US$1.3 trillion, with the impact felt most in developing economies, which suffered a 7% drop.

“The value of greenfield projects announced in Africa fell to $175 billion, from $196 billion in 2022. However, most countries registered increases in project numbers, with the overall number of project announcements in the region rising by 7 per cent to more than 800,” the report explains.

According to the report, six of the greenfield megaprojects announced in Africa last year are valued more than US$5 billion.

Mauritania’s AMAN green hydrogen project was the largest greenfield project announced globally in 2023. The project aims to generate 30GW from wind and solar. It is being developed on a 8500 km² site in northern Mauritania by CWP Global’s subsidiary CWP Terra.

The project is well underway with CWP Global’s website indicating it is moving to the pre-FEED stage. An MOU with the government has initiated the second phase of the resource measurement campaign.

“It is expected to generate US$34 billion in investment (several multiples of the country’s gross domestic product),” the UNCTAD report explains.

Other greenfield megaprojects were announced in Egypt at The Suez Canal Economic Zone and in other locations within Egypt, totalling US$10.8 billion. While Mauritania and Egypt garnered the lion’s share of megaprojects, several other countries across the continent pulled int substantial amounts.

“Three energy producers separately announced green hydrogen projects in South Africa totalling $7.1 billion, and there was substantial investment in Morocco as well,” the report explained.

Beyond green hydrogen megaprojects, e-mobility is also attracting significant foreign investment. Last year, for instance, Chinese lithium-ion battery manufacturer Gotion High Tech announced a US$6 billion investment in a 100-gigawatt-hour EV battery plant in Morocco.

Gotion is backed by Germany auto manufacturer, Volkswagen in this project to be located in Kenitra, Morocco.

Besides, foreign investors are increasingly targeting the solar and wind energy sector, which attracted US$10.8 billion in project finance, primarily in Egypt, South Africa, and Zimbabwe.

Also, investments in chemicals and electronics recorded some of the largest year-to-year increases in project values with a US$13 billion and US$7.6billion rise, respectively.

However, project values for electricity and gas supply projects dropped by US$33 billion compared with 2022, their drop is responsible for the overall decline in greenfield values.

“If executed, these projects could generate an additional 200,000 jobs in the region,” the report explains.

Foreign investors interested in the continent are primarily based in Europe, while investors in the United States and the United Kingdom also came to the table. Leading from Asia are China and Singapore.

Regional performance

In terms of targeted regions, North Africa saw a 12% decline in foreign investment value, while West Africa experienced a 1% dip. The greenfield investment in West Africa was significantly shaped by the announcement of the US$34-billion green hydrogen project in Mauritania.

While FDIs declined by 17% in Central Africa, there was a 56% increase in the number of greenfield projects and a 119% rise in their value.

In East Africa, Ethiopia witnessed a 11% decrease in inflows resulting in a 3% drop in this region. However, greenfield projects and international project finance deals increased by more than 30%, indicating better prospects ahead.

In Southern Africa, fluctuations in Angola continued to influence trends. Inflows to South Africa decreased by 43% despite higher mergers and acquisitions activity.

The African Continental Free Trade Agreement (AfCFTA) Investment Protocol adopted in 2023 is expected to contribute to growing intraregional FDI.

“The share of intraregional projects, though still relatively low, is higher in services and selected manufacturing industries (with 20 per cent of projects by investors from Africa) than in resource-based processing industries (with only 13 per cent of projects originating from the region…),” the report highlights.

“This indicates the pool of investors undertaking projects within the region is large for some sectors. Also, there is an opportunity to expand intraregional investment in processing industries as part of the general drive to increase value addition,” the authors further explained.

Untapped potential

The International Monetary Fund (IMF) global economic performance projections for 2024 listed six African countries in the top 10 fastest growing economies globally, evidence of unprecedented and untapped economic opportunities on the continent. That kind of growth also creates demand for investment.

According to the OECD, Africa faces a sustainable financing gap of up to US$1.6 trillion until 2030, hindering the implementation of existing and greenfield projects due to challenging economic dynamics and rising debts.

The continent’s vast natural resources and abundant, increasingly skilled human capital, particularly, make it a magnet for global investors looking to manufacture goods for global markets and the continent’s expansive consumer base. With a single trade zone – the African Continental Free Trade Area (AfCTFA) now under development – investing in Africa is also about securing a foothold in one of the world’s largest markets for products and services.

A new report from the UN Trade and Development, shows that while FDI inflows into Africa declined by 3% to US$53 billion in 2023 – consistent with global trends where FDI dropped by 2% – the continent nevertheless continues to witness significant expansion in greenfield investments, particularly in the burgeoning clean energy sector.

The following are the 10 African countries that attracted the most foreign direct investments in 2023 according to the World Investment Report 2024. 

• Egypt – Although foreign investment in Egypt decreased from US$11.4 billion in 2022 to US$9.841 billion in 2023, the year marked some of the most significant investment announcements, particularly in green hydrogen. This sector is set to remain a magnet for investors, fueled by Egypt’s ambitious green hydrogen strategy, which aims to supply 5-8% of the global hydrogen market by 2040.

• South Africa – The combination of inflationary pressures and persistent electricity challenges significantly dampened investment inflows into South Africa last year. In 2023, investments dropped sharply to US$5.233 billion, a steep decline from over US$9.2 billion in 2022. Despite this downturn, South Africa still managed to secure one of the highest shares of investment on the continent.

• Ethiopia – Recognized by the IMF as the second fastest-growing economy in Africa with a growth rate of 6.2%, Ethiopia follows closely behind Cote D’Ivoire at 6.6%. In 2023, Ethiopia attracted $3.263 billion in inflows, slightly down from the $3.6 billion in 2022. The country’s recent decision to open previously restricted sectors to foreign investors signals a major policy shift from its 1970s-era investment regulations. This change is expected to boost inflows significantly in the coming years.

• Uganda – It has emerged as a prime destination for foreign direct investment (FDI) in recent years, thanks to its stable macro-economic policies, liberalized business environment, strategic location as a logistics hub within the Great Lakes region, and burgeoning regional trade. The country attracted a substantial US$2.886 billion in FDI in 2023, nearly matching the impressive US$2.9 billion it garnered in 2022. This consistent investment inflow underscores Uganda’s growing appeal to global investors.

• Senegal – In 2023, Senegal emerged as a leader in West Africa by attracting an impressive US$2.641 billion in foreign direct investment (FDI). This surge in FDI highlights the country’s rapid economic growth and the transformative role of foreign investors. A prime example is Senegal’s recent landmark achievement of initiating its first oil production at the Sangomar field. Spearheaded by Australia’s Woodside Energy, the project underscores Senegal’s burgeoning potential and the pivotal contributions of international partnerships.

• Mozambique – In 2023, Mozambique drew in US$2.509 billion in foreign direct investment, slightly down from US$2.4 billion in 2022. The country’s rich natural resource sectors, including gas, coal, and minerals, continue to captivate investors. Recently, Mozambique revamped its investment laws, offering substantial fiscal and non-fiscal incentives to attract more capital. This legislative overhaul is poised to boost FDI inflows even further in the coming years.

• Namibia – Post-pandemic, Namibia has seen a significant boost in investment inflows, largely driven by a surge in oil and gas exploration. According to recent reports, the southern African nation attracted an impressive US$2.345 billion last year, nearly doubling the US$1.07 billion recorded in 2022. Additionally, investments in clean energy projects, including green hydrogen, solar, and wind, are further propelling Namibia’s investment growth.

• Nigeria – Investment interest in Nigeria is surging after a significant slowdown caused by currency fluctuations and inflation. Recent data reveals that foreign investments more than doubled, to US$1.873 billion, a substantial increase from US$895 million in 2022. Although this is still below the US$3.3 billion recorded in 2021, the potential for growth is immense, indicating strong future prospects for Nigeria.

• Cote d’Ivore – According to the latest IMF projections, Côte d’Ivoire boasts the fastest-growing economy, solidifying its status as a prime investment destination. In 2023 alone, it attracted a remarkable US$1.753 billion in foreign investments, up from US$1.599 billion in 2022. This significant increase underscores a promising future for the nation’s economic landscape.

• Democratic Republic of Congo – Inflows to the DRC held steady at US$1.635 billion in 2023 slightly down from US$1.8 billion in 2022. The mining sector, particularly the extractive industries, continues to dominate these investments, reaping the lion’s share of the benefits.

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Bonface Orucho, bird story agency