Despite negative headlines, Africa sees foreign direct investment and democratic consolidation gains

A sombre mood has dominated the discourse around Africa this year. At a recent investor roundtable in London, there was a sheepish silence when attendees were asked where the good news was to be found. Currency blowouts and rampant inflation, rising food and fuel prices, and ongoing security threats (including an increasing number of coups) have severely dampened investor sentiment towards the continent. 

Africa’s heavyweight economies especially have been battling — Ethiopia with an ongoing civil war; Nigeria with insecurity; Egypt with negative external shocks from the Russia-Ukraine conflict; and South Africa with persistent power outages. 

Yet there are reasons for optimism. Politically, Kenya and Zambia have seen peaceful elections with smooth handovers of power. Zambia demonstrated its maturity last year when the authoritarian-leaning former president, Edgar Lungu, conceded without contestation. And Kenya defied its tendency for electoral violence by this year delivering its most peaceful election since 1992. Meanwhile, ruling party majorities have eroded as liberation dividends fade in countries like South Africa, Angola and Botswana. 

Taken together, this points to a mixed democratic landscape rather than a universally negative picture. It also shows that incumbent victories are no longer a given. This is largely due to a younger, impatient electorate unimpeded by partisanship and the weight of history. 

Young people are demanding more effectiveness and accountability from their leaders. They are also more inclined to switch allegiance in the instance of failure — fuelling the resurgence of political oppositions across Africa. This is creating a more competitive politics where leaders must deliver or depart. 

There has also been political reform in other parts of the continent. In Tanzania, Samia Suluhu Hassan has opened up the political space, re-engaged the business community and ended the Covid-19 denialism of John Magufuli’s regime. 

Similarly, in Côte d’Ivoire, Alassane Ouattara has walked back years of animosity with longstanding political rival Laurent Gbagbo, repealing a 20-year sentence issued to the former statesman in 2018. Meanwhile, Ouattara has overseen a political dialogue process and re-engagement with the political opposition, which should aid his country’s stability. 

And Félix Tshisekedi has managed to keep the lid on a volatile Democratic Republic of the Congo, engendering relative calm in Africa’s proverbial powder keg (despite ongoing issues in the east and with Rwanda). This allowed for renewed contact with multilaterals like the International Monetary Fund (IMF) while easing consternation towards what still is a highly lucrative economy. 

There have also been positive developments economically. Although Africa is still wading through fiscal and balance of payments difficulties, there’s been broad uptake of IMF programmes — among as many as 25 countries — and a funding commitment of more than $16-billion. This suggests a more pragmatic and less ideological policy tilt by incumbent governments. 

Privatisation and deregulation efforts in Angola, plus Gabon’s novel carbon credit scheme and South Africa’s move to open electricity generation to private players are all dynamic policy changes that will yield long-term dividends.

Although financial markets have been unkind to African sovereigns, there is brighter news in other areas. Africa’s foreign direct investment trajectory is encouraging, as evidenced by a strong recovery in inflows from 2020’s lows. The latest United Nations Conference on Trade and Development World Investment Report says foreign direct investment to Africa reached a record $83-billion in 2021. 

The continent also saw an increase in the share of global foreign direct investment, going from 4.1% in 2020 to 5.2% in 2021, with ventures in so-called green and blue economies accounting for most capital inflows.