“Investment is up 75% in Africa!” That was the shallow takeaway from the UN Trade & Development’s (Unctad’s) World Investment Report 2025. However, as is typical with statistics, the important information was hidden in the nuance.
This investment figure referred to foreign direct investment (FDI). That’s good. These are more powerful drivers of growth than portfolio flows. FDI inflows into Africa hit $97bn in 2024. That was 6% of total FDI, up from 4% the previous year. And 11% of total FDI flows to developing economies, up from 6%.
Devil in the detail
So far, so good. However, several anomalies are necessary to colour in the picture. As the report explains: “This exceptional growth was largely attributable to a single megaproject: the Ras El Hekma urban development deal in Egypt. Net of the increase in Egypt, FDI flows to Africa were still up 12%, but they remained modest at about $62bn, or 4% of global FDI.”
Egypt’s $35bn megaproject is funded by the Abu Dhabi Developmental Holding Co and aims to transform the Ras El Hekma area, 350km northwest of Cairo on Egypt’s Mediterranean coast, into a thriving hub for finance, tourism, education and more. At present the region is better known for olive and fig farming.
This speaks to a broader theme in Africa’s investment landscape. Money is highly concentrated in very few locations. North African countries were the main winners, due chiefly to big spending on infrastructure and energy. FDI in Tunisia grew 21% to just under $1bn, and Morocco’s $1.6bn was a 55% jump.
The nature of FDI in the continent also changed. Greenfield projects (FDI projects smaller than megaprojects) fell to $113bn in 2024 from $178bn in 2023. However, at the same time, greenfield investment in North Africa grew 12% to $76bn.
Perhaps the most notable concentration issue lies in Africa’s 6% share of total FDI. This is spread very thinly for a continent that is home to about 20% of the global population — a figure forecast by the UN Economic Commission for Africa to grow to 28% by 2050.
Do more with less
This should all be read in the context of a notable decline in global FDI relative to trade and GDP. While all three are growing, for the past two years FDI has been losing ground to trade and GDP.
So, vast sums of money are being generated and deployed around the planet. Africa is attracting a growing share of this (albeit from a small base) in the form of FDI. But this loot is becoming relatively rarer. And while “75% growth” suggests that Africa is benefiting, it means that a small number of places, spread out around the continent, are benefiting.
Fortunately, global allocators of capital aren’t hiding what attracts their investments. Consultancy Kearney captures these pull factors in its FDI confidence index. Some are deeply embedded states of affairs such as domestic economic performance. That is hardly a switch a government can flick. But some are within a state’s control.
North African countries were the main winners, chiefly due to big spending on infrastructure and energy
Sitting atop Kearney’s 2025 rankings as the most important factor companies consider when deciding on where to deploy FDI is efficiency of legal and regulatory processes. In fourth place is ease of moving capital into and out of the market. And fifth is tax rates and ease of tax payments.
Those all amount to, among other things, friction. Hurdles that add to the time, difficulty and cost of doing business. On top of this, multiple forces pull us in different directions. We have more investment laws in place than ever before. They’re growing in popularity in Asia and Africa. As the Unctad report says: “Regionally, investment laws are more prevalent in Africa and in Asia, where 93% and 79% of countries, respectively, have adopted such legislation.” This tends to be a force that creates friction.
That said, investment laws often aim to plane down friction. So-called investment facilitation provisions use tools such as incentives and streamlining to encourage businesses to invest. Their use is growing too. “The inclusion of incentives in investment laws has grown significantly, now featuring in 81% of such laws enacted between 2015 and 2024.” This means more one-stop shops, permitting support, land access and better dispute resolution mechanisms.
The good news is that these don’t need generations to shift. We choose them. We can change them. We can select the ones that attract FDI. Or not. Growth of 75% suggests we’re going in the right direction.
* The Centre for African Management & Markets at the Gordon Institute of Business Science conducts academic and practitioner research and provides strategic insight on African markets. Macleod is a founding member
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