AfDB’s Adesina says investors are backing Africa

By Jonas Nyabor

Posted on Friday, 4 November 2022 12:48
Akinwumi Adesina speaking during the Africa Investment Forum 2022 Opening Ceremony. (photo: AfDB)

Boosters of African investment are trying to roll back the gloom around 2023 debt risks and subdued growth. They point to the continent's low default rates on infrastructure projects, the growing demand for the minerals of the future under African soils, and the clear pro-business reform agenda of the African Continental Free Trade Area.

Foreign direct investment in Africa fell 16% from $47bn in 2019 to $40bn in 2020 largely due to the Covid-19 pandemic. However, things are ‘looking much brighter’, says Akinwumi Adesina, president of the African Development Bank Group, who points to a record $86bn inflow in 2021.

The AfDB boss is betting on the continent’s vast growth potential to attract more investment in the coming years.

Government officials, investors and businesses are upbeat about sealing major deals worth billions of dollars at the 2022 Africa Investment Forum in Abidjan, Côte d’Ivoire.

Sub-Saharan Africa is projected to grow by 3.6% in 2022, says the IMF – more than one percentage point slower than 2021 mainly due to a worldwide slowdown, tighter financial conditions, and volatile commodity prices.

Nevertheless, “Africa has shown resilient recovery from the Covid-19 pandemic,” says Adesina. “FDI in Africa declined from $47bn in 2019 to $40bn in 2020 because of Covid-19. Africa recovered in 2021, as foreign direct investment rose to $83bn. Africa is the investment frontier in the world today, and in the future.”

From port infrastructure to agriculture, from health to mining, and from railways to green transport, the forum is advertising dozens of projects in different countries available for investment this year, coming on the back of major deals closed at previous events.

At the virtual forum held in March 2022, $15.6bn in investment interest for the construction of the Lagos-Abidjan highway was secured.

“The highway, which carries 75% of trade in the West Africa region, will help unleash greater growth, trade, and investment across the region,” says Adesina.

Discussions are underway to select a location for the project’s secretariat as it gets off the ground this year.

Demystifying risks

Opuiyo Oforiokuma, a senior partner at the Africa50 Infrastructure Acceleration Fund, says foreign investor interest in Africa will keep growing as the perception of high risk associated with investing on the continent is demystified.

Africa has the largest sources of renewable energy in the world. Africa has 65% of the uncultivated arable land left to feed the world.

“I believe we are going to see more capital coming in even from outside Africa because the opportunities are huge – and people are beginning to understand that the risk profile is not [as] negative as they think it is. We see a burgeoning market. As to how rapidly it will grow, it is difficult to predict, but overall the upward pressure is there,” he tells The Africa Report.

A 2021 report by Moody’s Analytics on defaults on infrastructure investments over 14 years shows that Africa has the lowest default rate on infrastructure projects in the world, 5.5%, compared to Latin America’s 12.9%, Asia’s 8.8%, Eastern Europe’s 8.6%, North Americas’ 7.6%, and Western Europe’s 5.9%.

Pull factors

The African Continental Free Trade Area, the largest free-trade zone area in the world, which recently kick-started under a guided trade arrangement, comes as a unique selling point for attracting FDI to Africa.

“By 2050, Africa will account for over one quarter of the world’s population. Africa has the largest sources of renewable energy in the world. Africa has 65% of the uncultivated arable land left to feed the world. The future of electric cars in the world depends on Africa because it has the largest sources of cobalt in the world, with massive sources of lithium in Zimbabwe, Namibia, Ghana, Mali, and Democratic Republic of Congo,” says Adesina.

Since its inception in 2018, the Africa Investment Forum platform has mobilised investment interest in excess of $100bn and is hoping to raise as much this year.

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