Ghana at risk of decline in FDI projects – E&Y
Even though Ghana has the advantage of a relatively business-friendly environment, good infrastructure and a strong governance track record, foreign direct investments in projects into the country are likely to decline, according to the Ernst & Young (EY) 2016 Africa attractiveness programme report.
It also indicates that sub-Saharan Africa continues to be one of the fastest growing regions in the world despite a relative slow down.
“Although, the capital value of projects was down year-on-year — from $88.5 billion in 2014 to $71.3 billion in 2015 — this was still higher than the 2010–2014 average of $68 billion. Jobs created were down year-on-year, but, again ahead of the average for 2010–2014,” it said.
According to the report, the US is the largest investor in Africa in 2015. It notes that the US has 96 investment projects valued at $6.9 billion in Africa.
The 2015 report released today, July 25, 2016, also notes that during 2015, traditional investors such as the UK and France, as well as the UAE and India, showed renewed interest in Africa.
“Over the past decade, there has also been a shift in sector focus in FDI from extractive to consumer-facing industries. Mining and metals, coal, oil and natural gas, which were previously the key sectors attracting major FDI flows, have given way to consumer products and retail, financial services and technology, media and telecommunications. This had accounted for 44.7 per cent of FDI projects in 2015,” it says.
The report however admits that last year was another tough year for the global economy generally and, relatively speaking, for sub-Saharan Africa specifically.
After a decade of GDP growth averaging close to 6 per cent, the International Monetary Fund’s (IMF’s) estimated growth for the region in 2015 was 3.4 per cent (down from 5 per cent in 2014). The projection for 2016 is now down to 3 per cent, from what was a forecasted 6.1 per cent in April 2015, it adds.
“In other words, growth momentum has slowed quite significantly in the past 18 months,” it says.
On Ghana, the report notes that the country stands out from most other African markets in terms of its positive FDI performance over the past five years, adding that it provides a good example of a country that has made the most of a strong AAI ranking, a market that at least has some critical mass (with a population of approximately 25 million and the 12th highest level of consumer spending in Africa) and the fairly recent discovery of substantial oil reserves.
“However as we look forward over the next decade, this picture is likely to change somewhat: Some of the top-performing countries from an FDI perspective are among those under the most macroeconomic pressure on the continent, including South Africa, Egypt, Morocco and Ghana. Of these, Ghana is probably most at risk of a significant decline in FDI projects.
Although there may be some volatility in the numbers in the other three over the next few years, given their positive AAI ranking, relative size and strategic significance, we anticipate them remaining among the leading FDI destinations in Africa for the foreseeable future,” it says.
By Emmanuel K. Dogbevi
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