Extractive Industry: “Mining no longer top sector attracting investors to Africa” – report

Vale Moatize Mine explosion,  Tete province

Africa’s mining potential is not longer the main attraction for foreign capitals wanting to invest in the continent, a study published Wednesday shows.

According to the latest “Africa Attractiveness” report by EY, the mining sector, including industrial and precious metals, coal, oil, as well as natural gas, collectively accounted for just 6.2% of foreign direct investment (FDI) that landed in Africa last year.

The surge in capital investment was primarily driven by capital-intensive projects in two sectors — real estate, hospitality and construction (RHC), and transport and logistics. The continent’s share of global FDI capital flows increased to 11.4% from 9.4% in 2015. This made Africa the second-fastest growing FDI destination by capital, EY says.

More than one fifth of FDI projects and more than half of capital investment into Africa came from Asia-Pacific in 2016, an all-time record, which EY says it’s a clear sign of the ongoing diversification of investors interested in the continent.

The analysts attribute the small figure corresponding to mining to a broadening of greenfield FDI projects beyond the extractive sectors, with most of the money (58%) flowing to the so called “hub economies” — South Africa, Egypt, Morocco, Nigeria and Kenya.

South Africa remains the continent’s leading FDI destination, when measured by project numbers, increasing 6.9%. Morocco regained its place as Africa’s second largest recipient with projects up by 9.5%, followed by Egypt, which attracted 19.7% more FDI projects than the previous year.

However, EY says there are new clusters emerging in the continent, being the Francophone and East African markets of particular interest to investors. They also noted that Ghana, West Africa’s second largest economy, remains a key FDI market.

“Investor sentiment toward Africa is likely to remain somewhat softer over the next few years. This has far less to do with Africa’s fundamentals than it does with a world characterized by heightened geopolitical uncertainty and greater risk aversion,” says Ajen Sita, Africa CEO at EY.

“Investors with an existing presence in Africa remain positive about the continent’s longer-term investment attractiveness, but they are also cautious and discerning,” adds Sita.

The EY Africa Attractiveness Index (AAI) was introduced last year, to measure the relative investment attractiveness of 46 African economies based on a balanced set of shorter and longer-term metrics.(Source:Mining.com)