Business
FDI in Sub Saharan Africa on the rise – Report
JOHANNESBURG – Africa’s share of global foreign direct investment (FDI) projects has reached the highest level in a decade, according to Executing Growth, EY’s 2014 Africa Attractiveness Survey.
The report combines an analysis of international investment into Africa since 2003, with a 2014 survey of over 500 global business leaders about their views on the potential of the African market. The latest data shows that while there has been a decline in FDI project numbers from 774 in 2012 to 750 in 2013, primarily due to ongoing uncertainty in North Africa, they remain easily in excess of the pre-crisis average of 390 projects per year.
There is a noticeable divide between FDI trends in North Africa versus Sub Saharan Africa (SSA). While FDI projects in North Africa declined by nearly 30%, projects in SSA increased by 4.7%, reversing the decline of 2012. This further widened the gap between the two sub regions, with SSA’s share of FDI projects exceeding 80% for the first time.
While the UK remains the lead investor into the continent, intra-African investment continues to steadily rise. Investors are also looking beyond the more established markets of South Africa, Nigeria and Kenya to expand their operations, as well as moving into more consumer-related sectors as Africa’s middle class expands.
Ajen Sita, Chief Executive Officer, EY Africa, comments, “Africa’s share of global FDI projects has grown steadily over the past decade and it is a promising sign that investors are now looking across the continent and to new sectors. Further regional integration and infrastructure development should continue to entice investors to the exciting investment opportunities that Africa can offer.”
There was significant movement in the list of top 10 countries by FDI projects in 2013. Only South Africa and Nigeria retained their first and third positions from 2012 with 142 projects and 58 projects, respectively. However, FDI projects in both these countries witnessed a slight decline. Countries such as Kenya with 68 projects, Ghana with 58 and Mozambique with 33 all moved up the ranks.
Zambia and Uganda were the new entrants in the top 10 list in 2013 with 25 and 21 projects respectively, an increase of more than 20%. In contrast, North African countries such as Morocco, Tunisia (ranked 8th in 2012) and Egypt slipped on the rankings.
In 2013, both West and East Africa surpassed North Africa for the first time, becoming the second and third most attractive sub regions in Africa after Southern Africa.
UK leads investment into the continent
The UK became the clear leader in 2013 with 104 projects, while the US fell from joint first place to second place with 78 projects, a 20% decline from last year. South Africa, the third largest investor, directed 63 investment projects into the rest of Africa, a 16% decline on last year but a significant increase from pre-crisis levels when it registered on average 12 projects. There was a sharp uptake in FDI projects by Spanish and Japanese companies with increases of 52% and 77%, respectively.
Intra-African investment is gaining momentum. African investors nearly tripled their share of FDI projects over the last decade, from 8% in 2003 to 22.8% in 2013. This growth is fuelled by the need for improved regional value chains and strengthening regional integration. Another driver of growth is the African investors’ understanding of the market and of the potential opportunities and challenges.
Michael Lalor, EY’s Lead Partner Africa Business Center, comments, “External investors supply long-term capital, skills and technology, and intra-African investment creates a virtuous circle that encourages greater foreign investment.”
Significant shift away from extractive industries towards consumer related sectors
The top three sectors – technology, media and telecoms (TMT) with 150 projects, retail and consumer products (RCP) with 131 projects and financial services with 112 projects – accounted for more than 50% of the total projects in 2013. During the year, RCP overtook financial services to become the second most attractive sector in Africa.
FDI projects in the real estate, hospitality and construction sector increased by 63%, making the sector the fifth most attractive, up three positions from 2012. On the other hand, for the first time ever in 2013, mining and metals exited the top ten sectors when measured by FDI project numbers.
When asked about the three sectors that would offer the highest growth potential for Africa in the next two years, investors highlighted the rising importance of agriculture which ranked only marginally behind mining and metals. Increasingly, infrastructure is also perceived as a key growth sector as well as consumer-facing industries including financial services, telecommunications and consumer products.
Michael comments, “Although perceptions indicate that resource driven sectors are expected to remain the industries with the highest potential over the next two years, the actual numbers show that infrastructure and consumer-facing sectors will increase in prominence as the middle class expands and consumer spending on discretionary goods increases.”
Africa’s perceived attractiveness relative to other regions has improved dramatically over the past few years. The overall survey results show that Africa has moved from third last position in 2011, to become the second-most attractive investment destination in the world, behind North America.
Sixty percent of survey respondents said that there had been an improvement in Africa’s investment attractiveness over the past year, up four percentage points from last year’s survey.
Ajen comments, “The good news in this year’s survey is that perceptions about the continent seem to be shifting. For the first time, Africa is seen as the second most attractive investment destination in the world. It has strong fundamentals to encourage investment including steady democracy and macroeconomic growth; an improving business environment; rising consumer class; abundant natural resources and infrastructure development.”
However, there remains a stubborn perception gap between those already operating on the continent and those who are not yet present. For the first time, this year’s survey shows that companies with a presence on the continent perceive Africa to be the most attractive investment destinationin the world. In stark contrast, those with no business presence in Africa still view the continent as the world’s least attractive investment destination.
Seventy-three percent of those who are already established in the region believe Africa’s attractiveness has improved over the past year versus 39% who are not established.
Africa’s cities are now emerging as the hotspots of economic and investment activity on the continent. Nearly 70% of respondents stressed the significance of cities and urban centers in their investment strategy in Africa.
In terms of perception, city attractiveness closely maps country appeal. In SSA, half of the respondents quote Johannesburg as the most attractive city in which to do business, ahead of Cape Town. Nairobi and Lagos are ranked as third and fourth most attractive cities, respectively. In North Africa, Casablanca, Cairo and Tunis are perceived as the top three cities in which to do business.
Investors highlighted that in order to attract greater investments, cities need to focus on the following critical factors: infrastructure (77%), consumer base (73%), local labor cost and productivity (73%) and a skilled workforce (73%).
Ajen concludes, “Africa’s stronger investment attractiveness is best explained by its own sustained growth rates in the context of slower global growth. Africa’s growth prospects are likely to remain solid, as an urbanizing and rising middle class drives demand for consumer products and improved services.”
Nigeria’s Gross Domestic Product (GDP) grew by 3.46% year-on-year in the third quarter of 2024, marking a strong performance compared to the 2.54% growth recorded during the same period in 2023 and 3.19% in Q2 2024, according to the latest data from the National Bureau of Statistics (NBS).
The growth was largely fueled by the services sector, which expanded by 5.19% and contributed 53.58% to the overall GDP.
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“The performance of the GDP in the third quarter of 2024 was driven mainly by the services sector,” the NBS stated in its report.
Key areas in this sector, including financial institutions, telecommunications, and trade, played significant roles in the economy’s growth.
The agriculture sector, while still positive, showed a slight slowdown, growing by 1.14%, compared to 1.30% in Q3 2023.
The industrial sector, however, posted a notable recovery, increasing by 2.18%, a marked improvement from the 0.46% recorded in the same quarter of 2023.
In nominal terms, Nigeria’s GDP at basic price for Q3 2024 reached N71.13 trillion, a substantial 17.26% increase from the N60.66 trillion recorded in Q3 2023.
“This performance is higher when compared to the third quarter of 2023, which recorded an aggregate GDP of N60,658,600.37 million, indicating a year-on-year nominal growth of 17.26%,” the NBS added.
The non-oil sector also showed strong performance, growing by 3.37% in real terms during Q3 2024, outperforming the 2.75% growth seen in the same quarter of 2023 and exceeding the 2.80% growth recorded in Q2 2024.
“The sector was driven in the third quarter of 2024 mainly by financial and insurance (financial institutions); information and communication (telecommunications); agriculture (crop production); transportation and storage (road transport); trade; and construction, accounting for positive GDP growth,” the NBS explained.
Despite the growth in the non-oil sector, its share of the total GDP decreased slightly to 94.43%, compared to 94.52% in Q3 2023, though it remained higher than 94.30% in Q2 2024.
The oil sector, in contrast, recorded a 5.17% year-on-year growth in Q3 2024, reversing the -0.85% decline seen in the same period in 2023.
However, growth slowed from the 10.15% recorded in Q2 2024. The NBS reported that Nigeria’s oil production averaged 1.47 million barrels per day (mbpd) during the third quarter, a slight increase from 1.45 mbpd in Q3 2023 and 1.41 mbpd in Q2 2024.
Family-owned businesses (FOBs) can continue to drive economic success, create value for shareholders, and positively impact their communities worldwide by staying true to their core values and adopting strategic practices that prioritise long-term growth, efficiency, and resilience.
This was part of the submission made by the Group Executive Director of Dangote Industries Limited, Halima Aliko-Dangote, during the Forbes Global CEO Conference in Bangkok, Thailand.
Halima, who is also the Executive Director, Family Office, spoke at the panel session on Family Business: Looking at the Next Frontier, opined that family-owned businesses have demonstrated exceptional resilience, navigating challenges and thriving over multiple decades.
Other speakers include the Managing Director and CEO of Worldwide Hotels, Carolyn Choo; the Managing Director of Damen Yachting, Rose Damen, a third-generation family shareholder of Damen Shipyards Group; and Co-Chairman of B.GRIMM Pharma, President of B. Grimm Joint Venture, and Board Member of B. Grimm Power, Caroline Link.
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According to her, success in family-owned businesses starts with shared values, goals, governance policies and alignment adding that reputation is part of ‘family capital’.
She maintained that governance structure, adherence to core values, customer satisfaction, optimization of shareholder value, meritocracy, integrity, leadership, brand equity, diversification/growth, philanthropy and preserving generational wealth play key roles to the success of our businesses.
Halima revealed that Dangote Group’s governance policies do not allow board and management to operate in silos as each business unit has at least three independent directors who offer a holistic view.
On other factors of success for Dangote Group, Halima emphasized, “We family-owned businesses have to stick to our tradition of asset rich-cash moderate or as my father will correct me, asset rich-cash poor. We as Dangote perpetuate a profitable business with strong values and strong governance structure. We make money while building our nation by contributing heavily to the global economy, creating massive jobs, thinking of our great grand kids and contributing excessively to humanity.”
Highlighting the significant contribution of FOBs to the global economy, Halima noted that studies by Mckinsey showed that they account for more than 70% of global GDP, generate annual turnovers of between $60 trillion and $70 trillion, and provide around 60% of global employment.
She stressed the crucial role these businesses play in creating jobs, sustaining communities, and driving development in sectors such as manufacturing, education, healthcare, and infrastructure across the world.
“Family-owned businesses (FOBs) have proven to be resilient, weathering challenges and thriving across multiple decades. Despite facing external pressures, many FOBs not only survive but also grow, contributing significantly to the global economy in ways that are often underestimated or overlooked,” she said.
She also pointed out that family-owned businesses often employ two key approaches in preparing the next generation for leadership roles: internal and external capacity building. Regarding internal capacity building, Halima explained that many families create internship programmes for young family members interested in taking over the business or assuming leadership positions.
“In Nigeria, we train the next generation so they can grow organically to leadership roles in family businesses. My dad’s approach is for you to start from ground up knowing you will get to leadership role if you work hard and do your job right. These experiences make it easier for you to learn the ropes and be prepared for leadership role in the future,” she pointed out.
On external capacity building, Halima discussed the practice of sending younger generations to work in non-family businesses. This approach enables them to acquire new skills, learn better processes, and gain diverse perspectives that can benefit the family business in the long run.
Halima revealed that she started her career as an Analyst at KPMG before joining Dangote Industries Limited.
The approach, she explained “removes the familiarity tag as the young generation got employed as other people and supervised to monitor their performance. This has been a common avenue business families have chosen to pursue for many years, having their next generation spend three to five years working outside the family business before eventually joining with a new set of skills and business knowledge.”
Addressing the challenges of succession planning, Halima emphasised the importance of involving the younger generation in the business early on.
She suggested that this creates a space for open communication, where the next generation can share their thoughts, ideas, and aspirations, while the senior generation provides critical information to help the next leaders make informed decisions.
She stressed the need for a balance between tradition and innovation in family-owned businesses. While tradition provides continuity and stability, she noted that innovation is vital to staying relevant and competitive in the modern marketplace.
“Successful family businesses recognise the need to adapt to changing consumer preferences, technological advancements, and market trends. Family businesses often have a wealth of experience and deep-rooted traditions. They can also benefit from external expertise and fresh perspectives,” she concluded.
A total of 9,000 youths in the Niger Delta have acquired entrepreneurial skills under the LiveWIRE programme of The Shell Petroleum Development Company of Nigeria Limited (SPDC) since it was introduced in 2003 as part of efforts to boost employment opportunities among people aged 18 – 35 years.
It was gathered that the recipients were trained and supported with start-up grants and business mentorship enabling them to launch their own businesses and become employers of labour.
The latest training, sponsored by the SPDC Joint Venture which includes the Nigerian National Petroleum Company Limited, TotalEnergies and Nigerian Agip Oil Company, involved more than 1,000 young entrepreneurs from host communities in Rivers, Bayelsa and Delta states. They graduated last week in Port Harcourt having developed business plans and pitched them to experts as part of the training. 654 trainees were selected as best-performers.
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“We’re delighted at the success of the LiveWIRE programme,” SPDC Director and Head Corporate Relations, Igo Weli, said at the graduation ceremony. “This training is set aside for young people from our host communities which means they can also enjoy the benefits of the programme and join the teeming number of entrepreneurs, several of whom now have the chance to participate in SPDC’s business as vendors. LIveWIRE is one of many ways through which Shell and her partners are powering progress in Nigeria.”
The graduation ceremony featured a technical conference with the theme, “Unlocking Growth: Leveraging Policies to Build an Inclusive Tech Eco System in the Niger Delta.” The keynote speaker, Iyke Kemabonta, and panelists, Soala Jumbo, Davies Awongo, Kalada Briggs, Vivien Ene and Ezieke Amaefula, challenged the beneficiaries to grow their businesses, overcome environmental challenges and enable the Niger Delta to reap the rewards of the programme.
Trainees from the 2023 Regional LiveWIRE programme from Rivers, Delta, Bayelsa, Imo, Abia, Akwa Ibom, Cross River and Edo states also joined the graduation ceremony. Beneficiaries were inducted into the LiveWIRE Alumni Group by three previous participants who now run their own businesses — Precious Adeho, Queen Esther Bolou-Ebi and Kalada Briggs. The trio encouraged the recipients to use the opportunity as launching pads into international recognition and success.
In a notable achievement, five previous beneficiaries won the LiveWIRE International “Go and Trade Enterprise Linkage Award” which enabled them to embark on trade visits to London, Dubai, Malaysia, and neighboring Ghana. Livewire Nigeria also offers beneficiaries the chance to compete for the Global Shell LiveWIRE Top Ten Innovators Award which comes with huge rewards.
LiveWIRE is Shell’s global enterprise development initiative for small businesses and is active in 18 countries. As at 2023, the programme had trained about 3,400 people and helped create more than 1,200 jobs around the world.
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