Developed countries are the most important source of FDI flows to African countries, accounting for 72% between 2000 and 2008 (UNCTAD, 2010c). Hit hard by the global economic crisis, OECD countries substantially reduced their foreign investment activities. According to FDI outflow data compiled by the OECD (n.d.), member countries reduced their global FDI outflows by 43% from USD 1.8 trillion in 2008 to USD 1 trillion in 2009. OECD FDI flows to Africa also took a hit, but to a much lesser extent: from USD 34 billion in 2008 to USD 29 billion in 2009. As a result Africa’s share of OECD FDI outflows grew from 2% in 2008 to 3% in 2009, up from less than 1% in 2000. Despite this positive development, FDI from the OECD is concentrated in a few countries and sectors and does not reach the whole continent equitably. During 2007‑09 60% of OECD investment in Africa was made in three countries (South Africa, Egypt and Nigeria). The largest OECD investors in Africa are companies from the United Kingdom, France and the United States, having historically mainly invested in extractive industries.

Data on FDI to Africa from non-OECD countries are difficult to obtain. In a sample of ten African countries, whose central banks provided the AEO with their own data on FDI inflows,3 OECD countries accounted for 83% of FDI inflows between 2005 and 2010. The Middle East constituted the second most important region of investors, followed by African countries (intra-African investments). China and India make up roughly 3% of FDI to these ten African countries, with India’s share being larger than China’s. According to China’s statistical bulletin, in 2008 China invested USD 5.5 billion in sub‑Saharan Africa, representing 9.82% of its outward FDI. This investment from China was up from USD 70 million in 2003 but declined to USD 1.1 billion in 2009 (IMF, 2011). South Africa, where the Chinese Industrial and Commercial Bank acquired a 20% stake in the Standard Bank, recorded most of the 2008 growth.

These numbers might seem low.  However, data on FDI flows from emerging economies to Africa should be seen in the context of a broad variety of financing mechanisms that these countries provide to Africa. Export credits, for example, play a much more significant role in the Africa portfolios of emerging economies than in OECD countries. Generally, investments from private entities from emerging economies in Africa are most likely to be registered as FDI, whereas deals involving state-owned enterprises often involve a range of financing instruments and are not accounted for as FDI.

Although still largely focused on extractive industries, growing investments by emerging economies in Africa have the potential to become key drivers of economic development. Several deals by emerging partners in Africa combine the development of resource extractions with the development of industrial complexes and the construction of necessary infrastructure. Moreover, emerging economies invest increasingly in other sectors, starting to build local manufacturing capacity.

African investors are an equally critical source of more diversified FDI. Most African investment in Africa is made in neighbouring countries, focusing on manufacturing and services rather than primary commodities. Intra-African investment therefore benefits and helps to drive regional integration and structurally balanced economic development in Africa. The increasing volume of intra-African FDI is thus very positive.

South Africa is the most vital source of intra-African FDI and the second most important developing country investor in Africa after China. The share of African host economies in South Africa’s outward FDI stock reached almost USD 11 billion in 2008, representing 22%, compared with 5% in 2000. In 2009 South Africa invested USD 1.6 billion (FDI outflows) in other African countries, a reversal from its disinvestment activities during 2008 and a return to an active foreign investment strategy in Africa.

Northern Africa ranks second as a source of intra-African FDI. Libya’s sovereign wealth fund, the Libyan Africa Portfolio Fund for Investment (LAP), has over USD 5 billion in capital and invests, both directly and through its subsidiaries, in a wide range of sectors in many African countries. Egypt’s Orascom also has a broad portfolio of investments throughout Africa, notably in telecommunications and construction. Morocco holds 55% of its stocks of outward FDI in North Africa, and Tunisia 84% (IMF, 2010 a).  Given this importance of North Africa as a source of intra-African FDI, the recent political turmoil in this region will likely negatively affect these flows in the near future.