African Infrastructure Projects Spur FDI Investment

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Africa is the world’s fastest-growing region for foreign direct investment. From 1990 to 2013, the United Nations Conference on Trade and Development (Unctad) says, FDI inflows to Africa surged 19-fold, from $3 billion to $57 billion, and the recently released EY 2015 Africa Attractiveness Survey reports that capital investment surged to $128 billion, a year-on-year increase of 136%. Average investment per project in 2014 rose to $174.5 million from $67.8 million in 2013.

“The perception of investing in Africa has traditionally been rather negative, [tinged] with fear of the unknown. However, in 2014, traditional investors refocused their attention on the continent, attracted by its strong macroeconomic growth and outlook, improving business environment, rising consumer class, abundant natural resources and infrastructure development,” says Charles Brewer, managing director, sub-Saharan Africa, at international logistics giant DHL Express. These factors pushed global capital investment and job creation on the continent to an all-time high. Infrastructure projects currently underway include a West African rail network to connect Benin, Burkina Faso, Niger, Ivory Coast, Ghana, Nigeria and Togo; the Mombasa-Kigali Railway Project—stretching almost 3,000 kilometers and connecting three East African states (Kenya, Uganda, Rwanda); the Ethiopia-Djibouti Rail Link; the New Jinja Bridge, crossing the Nile in Uganda; and the North-South Corridor—designed to connect eight Southern African countries with more than 10,000 kilometers of roadways.

“Efficient infrastructure is critical for ensuring the effective functioning of the continent,” says Brewer. “Underdeveloped infrastructure drives up logistics costs.” He notes supply-chain costs are an estimated nine times higher in Africa, as compared with other regions of the world.

Continued focus and investment in market-leading infrastructure will better connect Africa to the rest of the world and create opportunities for African businesses, allowing them to trade across borders and with new target markets. “DHL Express is committed to not only connecting others to Africa...but to making the rest of the world the next frontier for Africa,” notes Brewer.

To help achieve this growth, DHL made significant investments in sub-Saharan Africa, including €47 million ($53 million) announced during the past year.

Brewer says major projects include upgrades to facilities and shipment-handling systems in South Africa, Kenya, Uganda, DRC, Rwanda, Angola, Zimbabwe and Botswana.  The company is planning upgrades in Ghana, Nigeria, Ethiopia, Benin, Cameroon, Guinea Republic, Gabon, Tanzania, Mauritius and Cote D’Ivoire.

INNOVATION IS KEY TO FUTURE SUCCESS

It isn’t just logistics companies that are benefitting from infrastructure improvements. Information and telecommunications is also growing. Over the past five years, mobile subscriptions hit a penetration rate of 74% across the continent. According to consultancy Frost & Sullivan, Africa’s mobile and Internet market growth will catapult the e-commerce market to $50 billion over the next three years, from $8 billion in 2013.

In July, IBM announced plans to invest $60 million over three years to develop the new generation of technical talent in Africa. Naguib Attia, chief technology officer and VP Africa skills initiative and technical leadership, MEA (Middle East and Africa), says IBM is committed to helping Africa develop skills and infrastructure to support long-term economic expansion, and fostering innovation.

“At IBM we recognize that we won’t succeed, long term in Africa unless we and our clients have access to a large pool of people with the skills needed for 21st- century knowledge work. So, over the next three years we will expand our professional and academic skills-development programs in Africa to several countries.”

Although many African governments are playing an increasingly proactive role in promoting innovation, Attia says the speed of technological change and industry demand are moving much faster than higher education’s ability to keep up. “Many African countries are now recognizing the importance of a broad collaboration across academia, government and enterprises. We believe that multinational companies like IBM have an important role to play,” he says.