FDI in Africa in decline, with regional and sectoral divides – report

Foreign direct investment (FDI) to Africa experienced its sharpest decline in years in Q1 2025, according to GlobalData's Strategic Intelligence: FDI Trends in Africa (2025) report. While this decline reflects a global trend, there are wide sectoral and regional divides.

There have also been positive developments in 2025. In January, nearly 50 nations ratified the African Continental Free Trade Area (AfCGTA), inching the continent closer to reaching a single market for its 54 countries. The United Arab Emirates (UAE) and Kenya also signed a Comprehensive Economic Partnership Agreement, aiming to strengthen economic ties in the various sectors.

"Access to international credits markets and defining equal-footed investments continues to be the leading factors combative to economic development prospects," the report notes. It adds that FDI can help fill the void created by these barriers.

"While the African Union continues to wrestle with inequality and bureaucratic obstacles, the ratification of AfCGTA, on behalf of 48 African Nations in January of 2025, marks a historic step towards economic independence. Moving forward, stronger intracontinental economic ties will lead to more equal-footed FDI,” GlobalData FDI economist Ollie Brown notes.

Africa in 2025

According to GlobalData's FDI database, Africa's global share of opened greenfield FDI projects fell from 3.8% in 2024 to 3% this year. The report projects that this share will remain limited as a mix of geopolitical and financial circumstances keeps investors risk-averse. Global capital expenditure (capex) invested in open greenfield FDI projects in Africa has dropped since 2021, from $17bn (2021) to $6bn (2025).

The continent's ability to attract FDI later on in the year will depend "on retained global investors confidence, as opposed to nation-specific factors".

"Africa's FDI landscape is undergoing structural transformation. Prioritising strategic realignment over expansion, sizeable shifts are noted across three key domains: volume, sectoral composition and source diversification," GlobalData emerging markets economist Doha Ahmed notes.

"Greenfield FDI inflows have declined sharply, reflected not only in capex continuously dropping from $17bn in 2021 to a projected $10bn in 2024, but, simultaneously, project volumes plunged from a peak of 615 in 2022 to just 448 in 2024," she adds.

Regional and sectoral variability

There is a wide regional variability when it comes to which countries are receiving investment. Egypt and Morocco, both in North Africa, are the continent's top FDI destinations.

Egypt's joint megaproject with the UAE represented a $35bn investment, which alone drives up the continent's FDI intake significantly. Morocco's strong performance in 2024, the report suggests, can be attributed to "its role as a nearshoring hub for Europe, political stability and a favourable business climate".

It underlines how some middle-income economies have benefited from the reshoring/nearshoring trend brought on by heightened global protectionism. After Morocco, South Africa is the third top inward FDI location by project volume.

Some destinations that follow, such as Kenya, Tanzania and Tunisia, have been held back "due to rising debt levels alongside regulatory uncertainty".

In terms of FDI projects opened, software and IT received 19% of investment between 2022 and 2024, particularly in Kenya, Nigeria and Egypt. Communications and media has 8% of opened FDI projects, renewables and alternatives 7%, and metals and minerals 5%.

In the renewable and alternative power sector, there is a major gap between the number of announced projects (32%) and the number of opened projects (7%). The report suggests this lag is caused by sector specificities – in this case, high capex, long project cycles and too much red tape. However, other sectors such as software and IT services, communications and media, and logistics have much higher conversation rates due to "a more execution-friendly environment".

Changing sources of investment

Despite a changing global landscape, the US remains Africa's biggest investor, announcing 137 projects between 2023 and 2025, fuelled by "strategic competition with China". In the past, US initiatives such as Prosper Africa and the Development Finance Corporation have also been important sources of funding. However, these organisations are subsidiaries of USAID, which has been undergoing major funding cuts since February, suggesting their funding will decline.

"Amidst an increasingly volatile geopolitical landscape, Africa’s donor base has diversified, with non-traditional players such as the UAE becoming increasingly involved. This shift denotes the weaponisation of FDI, as it becomes more commonly utilised as a geopolitical tool, blurring the fine line between economic partnership and strategic influence," Ahmed adds. These investments are supported by sovereign wealth funds such as Mubadala and EDQ.

Conclusions

GlobalData's analysts expect FDI in Africa to shift away from extractive primary commodities and refocus on renewable energy, tech and manufacturing. They expect African leaders to recognise the power of FDI and therefore continue to improve and liberalise their investment climate as well as invest in infrastructure to strengthen supply chain efficiency.

"FDI in Africa in decline, with regional and sectoral divides – report" was originally created and published by Investment Monitor, a GlobalData owned brand.

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