Africa's share of global investment market shrinks: UNBy LEE MWITI | Thursday, April 28   2011 at  15:23

Africa's share of the global outgoing Foreign Direct Investment (FDI) market shrunk in 2010 even as new data showed that the regional economy was growing faster than the world average.

South Africa, Libya and Egypt accounted for over half of the continent's outward FDI total last year, which, however, declined in from $4.5 billion in 2009 to $4 billion, newly released figures by the United Nations Conference on Trade and Development (UNCTAD show.

This figure was, however, barely one per cent of the total outward investment from developing countries, who accounted for a third of the total outflows last year.

Some $1.35 trillion was invested globally in 2010 as outgoing FDI, a 13 per cent improvement from 2009 when $1.12 trillion was spent. This is still 40 per cent below levels in 2007, the year before the global crisis.

"The recovery of FDI outflows in 2010 was driven by higher reinvested earnings, mainly due to strong corporate profits and other investments (mainly intra-company loans), while equity investments remained sluggish," it said.

The UN trade body's investment trend monitor notes that developing and transition economies accounted for 28 per cent of total outgoing investment, up from 15 per cent in 2009.

The biggest investor

This reflects the strength of their economies and transnational corporations, and also their search for new markets, it said.

FDI refers to foreign ownership of 10 per cent or more of productive assets in a host economy, and includes mergers and acquisitions. UNCTAD's data measured only outgoing investment, as opposed to total spend.

It is, however, unclear as to the direction of outward FDI in Africa this year. Both Egypt, which more than doubled its outward FDI, and Libya have this year fallen into unrest.

At its peak, Credit Agricole bank estimated that Egypt's uprising was costing the economy $310 million every day. Economists at the bank revised their growth estimate for the country this year from 5.3 per cent to 3.7 per cent.

Libya, through its investment vehicle, the Libyan Arab Jamahiriya, was the biggest investor in Africa, but has seen many of its assets frozen or taken over as countries seek to comply with sanctions imposed by the United Nations.

UNCTAD, however, expects FDI outflows to continue rising in 2011, led by Brazil, India, China and Russia.

"Outflows from these economies are expected to continue to grow in 2011, as the result of rapid economic growth, abundant financial resources and strong motives of firms to acquire mineral resources and strategic assets abroad," it says.

A final report is expected in July 2011.