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Africa: Africa External Financial Flows

2012/08/09

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Africa External Financial Flows

Between 2000 and 2010 the sum of foreign direct investment (FDI), portfolio investment and official development assistance (ODA) increased almost fivefold, from USD 27 billion in 2000 to an estimated USD 126 billion in 2010 (OECD/DAC, 2010; UNCTAD, 2010a; IMF, 2010a).

 

It is the changing composition of these flows, however, that best represents Africa’s new economic dynamism: since 2005 Africa has attracted more FDI than ODA flows. Moreover, Africa’s share of global FDI flows has risen over the last decade, from 0.7% in 2000 to 4.5% in 2010. These figures offer an impressive testimony to Africa’s changing role in the world and its increasing ability to harness the opportunities from globalisation. Nevertheless, some challenges remain.

Foreign Direct Investment in Africa continues to be concentrated in a few countries and sectors, with 15 oil-exporting countries receiving 75% of FDI flows, pointing to a further need for diversification. Many governments are tackling this challenge and show commitment to improving institutional frameworks. The outlook for FDI flows to Africa in 2011 is basically good given the strong recovery in many parts of the world and rising resource prices. The current uncertainty in north Africa renders predictions difficult, however, as the region has been Africa’s top FDI destination for the last five years.

Official Development Aid globally reached USD 120 billion in 2009, a 0.7% increase in real terms against 2008. ODA increased despite the financial crisis and its severe impact on government budgets in donor countries. Net bilateral ODA from donors that are members of the OECD Development Assistance Committee (DAC) to Africa totalled USD 28 billion in 2009, of which USD 25 billion went to sub-Saharan Africa. This represents an increase of 3% in real terms over 2008 for all of Africa and an increase of 5.1% for sub-Saharan Africa.

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