Serrari Group

Africa is experiencing a notable shift in investment trends, particularly in the clean energy sector, despite a challenging global economic environment. In 2023, the overall value of international project finance deals in African nations decreased by 50% to $64 billion. However, the continent’s appeal for greenfield megaprojects has strengthened significantly, attracting several high-value initiatives.

Major Greenfield Projects Lead the Way

Among the most significant developments is a green hydrogen project in Mauritania, expected to generate $34 billion in investment—an amount that vastly exceeds the nation’s GDP. This project highlights Africa’s potential as a leader in the green energy sector.

Renewable Energy Investments

Over $10 billion has been invested in wind and solar energy projects across Africa, with Egypt, South Africa, and Zimbabwe hosting some of the largest initiatives. These projects are crucial for enhancing energy security and promoting sustainable development.

Electric Vehicle Advancements

The electric vehicle (EV) sector in Africa is also witnessing substantial growth. Morocco has secured a major investment to establish a $6.4 billion electric vehicle battery manufacturing facility, reflecting the increasing importance of EV value chains on the continent.

Leading Investors

The Kingdom of the Netherlands, France, the United States, the United Kingdom, and China are the primary economies driving foreign direct investment (FDI) in Africa. Data from UNCTAD shows that the Netherlands increased its investment from $89 billion in 2018 to $109 billion in 2022, underscoring sustained interest from developed nations.

Regional Investment Trends

North Africa

North Africa saw a 12% decline in foreign investments. Egypt experienced a reduction in mergers and acquisitions, while Morocco had decreased FDI inflows but remained attractive for greenfield projects.

West Africa

FDI flows to West Africa fell by 1%, heavily influenced by the green hydrogen project in Mauritania. Even without this project, the value of greenfield investments tripled, indicating strong underlying investment activity.

Central Africa

Central Africa experienced a 17% decline in FDI. Despite a 56% increase in the number of greenfield projects and a 119% rise in their value, the overall investment climate was affected by the downturn in international project finance deals.

East Africa

East Africa’s FDI inflows dropped by 3%, mainly due to an 11% decrease in Ethiopia. However, the region saw more than a 30% increase in greenfield projects and international project finance deals, suggesting improved prospects ahead.

Southern Africa

Southern Africa’s FDI inflows were volatile, influenced by fluctuations in Angola. Inflows to South Africa decreased by 43% despite increased mergers and acquisitions activity.

Regional Groupings and Future Prospects

Compared to 2018, FDI inflows have grown for major regional groups like the Economic Community of West African States (ECOWAS) and the Southern African Development Community (SADC). These regions are well-positioned to attract further foreign investments, particularly in renewable energy.

Conclusion

Africa’s commitment to sustainable development is gaining traction, bolstered by significant foreign investments in clean energy and electric vehicles. As the continent continues to attract high-value projects, it is poised to play a crucial role in the global transition to a greener economy.

photo source: Google

By: Montel Kamau

Serrari Financial Analyst

21st June, 2024

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