Foreign Direct Investment (FDI) is widely recognized as a key driver of economic growth, development, and industrialization. It acts as a catalyst for technological advancement, job creation, and enhanced production capacity, helping countries modernize their economies and integrate into global value chains. However, despite its transformative potential, Africa continues to capture a disproportionately small share of global FDI.

According to UNCTAD’s World Investment Report 2023, FDI inflows into Africa totaled just $45 billion in 2022, representing a mere 3.5% of global FDI. This underwhelming share is starkly out of sync with the continent’s vast economic potential, deepening the paradox of low FDI despite urgent developmental needs.

Sectors like manufacturing, energy, and agriculture—key drivers of economic transformation and job creation—remain underfunded, limiting their capacity to meet the demands of a rapidly growing, youthful population expected to double by 2050. This highlights the need for investments in critical areas such as education, healthcare, and technology to capitalize on the demographic dividend.

While Africa’s share of global FDI is low, the continent holds immense potential to attract investment by capitalizing on its unique value propositions. With approximately 30% of the world’s mineral reserves, including essential resources like cobalt, gold, and platinum, Africa is rich in raw materials that are foundational to global supply chains, particularly for green technologies.

Additionally, the continent boasts vast tracts of arable land and abundant renewable energy resources, offering a solid base for industrialization and sustainable development. These resources remain largely untapped or exported in raw form, missing an opportunity to add value locally and diversify Africa’s economy. Furthermore, the continent’s fertile soil and favorable climate offer significant prospects for agri-manufacturing, which, if harnessed effectively, could attract FDI in agribusiness, food processing, and related industries. Combined with a youthful labor force, Africa has the potential to establish itself as a global leader in sustainable industrialization and agri-manufacturing.

Despite these advantages, the primary barrier to FDI is the lack of well-prepared, bankable investment opportunities. Many African countries struggle to develop a pipeline of projects that align with the expectations of global investors and Development Finance Institutions (DFIs). Without detailed feasibility studies, clear return-on-investment projections, and effective risk mitigation strategies, many African projects fail to compete with better-structured opportunities in other emerging markets, such as Southeast Asia. Additionally, Africa’s underutilization of blended finance mechanisms—where public and private funds are combined to de-risk investments—limits its ability to attract large-scale private capital. These financing gaps prevent the continent from tapping into the significant global pool of FDI that is essential for addressing infrastructure deficits and spurring sustainable development.

To overcome these challenges, Andersen plays a crucial role in bridging the gap between Africa’s need for FDI and the lack of bankable projects. The firm works closely with governments, counties, and private-sector stakeholders to develop investment-ready projects from conceptualization to execution. By conducting in-depth feasibility studies and structuring deals that are attractive to global investors, Andersen ensures that projects are not only competitive but also aligned with international funding priorities. Furthermore, by facilitating the use of blended finance mechanisms and de-risking investment opportunities through partnerships with guarantee companies and DFIs, Andersen enables institutions to unlock the capital they need for transformative projects.

This material is intended solely for informational purposes and should not be relied upon without seeking specific professional advice on the matter. Should you have any questions regarding this topic, please feel free to contact our team at info@ke.andersen.com or +254 20 5100263.

Contributor & Contact Person

Brittany Mangara

Senior Associate, Strategy & Economic Advisory

brittany.mangara@ke.andersen.com