Africa’s Growing FDI Supporting Employment

Spurred by several megadeals, Africa is becoming a more attractive investment destination creating jobs for its people. FDI investors have introduced services ranging from luxury to manufacture which allow export to developed countries.

Employment provides an important linkage between economic growth and poverty reduction. Heads of state gave due emphasis to employment creation, both in the context of poverty reduction and by using labor resource for growth as one of the most important resources the continent is endowed with. In Ethiopia for instance, the labor force is growing much more rapidly because of the youth-dominated demography. There are many more under 15 years old entering the workforce each year than there are people retiring from the labor force. This calls for more projects to come to the country to accommodate the growing employment demand.

Although project numbers in Sub Saharan Africa (SSA) reached their lowest point since 2010, with South Africa, Angola, Nigeria, Ghana and Kenya receiving fewer FDI projects; Ethiopia and Mozambique continue to attract larger investment inflows hosting international well known brands like Maersk Oil,, African Lakes, and Ethiopia Hunt Oil Company amongst others. In 2014, investors, including those from North America and the Middle East, refocused their attention on Africa, those from the United States, France, the United Arab Emirates (UAE), Portugal and China were particularly active this year. From a regional perspective, Western Europe and Africa remain the largest sources of FDI into the region..  In line with these trends, FDI data reveals strong inflows into real estate, hospitality and construction.

Africa has attracted substantial capital flows in the past decade bolstered by strong growth prospects and better economic management. A joint study by the African Development Bank (AfDB), the Organization for Economic Cooperation and Development (OECD) and the United Nations Development Program (UNDP) estimates that external financial flows to Africa have quadrupled since 2000.

On the other hand, the average investment in the region almost doubled to $110.1 million and foreign investors created over 100,000 new jobs according to Ernst and Young attractiveness 2015 survey. Untapped natural resources and growing interest in property and hotel development continue to attract large projects and employments. The underlying trend in SSA remains one of steady FDI progress.  Since 2007, FDI projects in East Africa have grown by 19.9%, the strongest in Africa. The region has also attracted growing FDI investment and jobs during this period.

In 2014, the number of jobs created by FDI in East Africa almost doubled. In 2014, Ethiopia emerged as the 8th largest recipient of FDI projects in Africa, up from 14th position in 2013.  During the past year, 32 new projects accounting for 4.4% of the African total employment emerged in Ethiopia. The inflow reflects the combined attractions of Africa’s second-largest population, numbering over 96 million and an affordable workforce. Ethiopia, now Africa’s fastest-growing economy, has slowly been opening up to foreign investment in manufacturing and retail. However, telecommunications and financial services remain the preserve of state-owned enterprises.

By Eden Sahle

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