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African countries hope that 2023 will begin the recovery of foreign investment. To finance mainly energy and mining projects.
Most African countries went through a difficult year in 2022. Marked by acute funding problems for some States. And a strong inflationary surge on almost the entire continent. In sub-Saharan Africa more than one out of two countries has experienced double-digit inflation. This uncertain business climate has stunted growth and discouraged foreign investors. The figures are not yet published, but according to projections, foreign direct investments made in 2022 are a little below those of 2021. 2021 was an apparent good vintage with 80 billion dollars invested but misleading since almost the half came from a share exchange in South Africa and not from a new project.
So there is a big catch-up expected this year, will it really take place?
This is what African countries are hoping for, even if growth and therefore the economic environment will still be constrained. The rest of the world’s demand for energy and metals will be the driving force. With the war in Ukraine, African gas and oil are in great demand by Europeans. TotalEnergies and Britain’s Shell are the most active on major projects at the moment. Especially in Mozambique. And in Namibia, where new discoveries of gas deposits were made last year. Germany wants to boost its investments on the continent in liquefied natural gas and green hydrogen. The energy transition, which consumes a lot of metals, could also fuel new projects in mining. Africa holds 30% of the world’s ore reserves and its subsoil is full of the metals required by the energy transition such as nickel, cobalt, graphite and lithium. But its share in world production is still very low, Africa only produces 5% of the world supply of metals.
Which countries should take advantage of this influx of new money?
In addition to the oil and gas countries already mentioned in Southern Africa, West African countries should benefit from this renewed interest. German entrepreneurs present in Africa cite Senegal, Nigeria and Mauritania as a priority. Ethiopia should also be one of the countries most sought after by foreign investors, now that an end has been put to the deadly civil war which lasted nearly two years. Ethiopia is one of the flagship countries of the Silk Roads built by China. Projects are in the making in the textile industry and the liberalization of the banking sector.
In the field of energy, foreign investments are mainly export-oriented
Including in the field of renewables. Where one of the biggest projects of the moment foresees the export of solar and wind energy from Morocco to the United Kingdom via submarine cables. In this niche, existing investments are concentrated in a handful of countries. In addition to Morocco, South Africa, Egypt and Kenya absorb three quarters of the capital invested. But this is only a drop in the bucket compared to the magnitude of the needs of a continent where 43% of the population does not have access to electricity. – the power supply has deteriorated as a result of the pandemic and the war in Ukraine which has pushed up energy prices. Renewable is part of the solution. And for that, the amount of investment will have to be increased tenfold. According to the latest figures available, Africa received only 0.6% of the 434 billion dollars invested in the world in 2021 in the renewable energy sector.