Africa’s FDI Plunge: Resilience in the South Masks a Looming Investment Crisis
A staggering $59 billion – that’s how much foreign direct investment (FDI) flowed into Africa in 2025, a 38% drop from the previous year. This isn’t just a dip; it’s a stark warning signal, revealed in UNCTAD’s latest “Global Investment Trends Monitor,” indicating a potentially prolonged period of diminished international confidence in the continent’s economic prospects. While global FDI saw a 14% increase, Africa bucked the trend, highlighting a growing divergence in investment patterns and raising critical questions about the future of economic development across the region.
North Africa’s Dramatic Downturn: Beyond the Megaproject Effect
The most significant decline occurred in North Africa, where FDI plummeted by a massive 67%, from $51 billion in 2024 to just $17 billion in 2025. This dramatic fall isn’t a reflection of inherent weakness, but rather the absence of a singular, massive project: the Ras El-Hekma megaproject in Egypt. This $35 billion urban complex, spearheaded by Abu Dhabi Developmental Holding Company, artificially inflated 2024’s figures. The reliance on such large-scale, one-off investments exposes a vulnerability in the region’s ability to attract sustained, diversified FDI. Without a pipeline of similar projects, North Africa faces a challenging road to recovery.
Sub-Saharan Africa: A Relative Bright Spot, But Cracks are Showing
In contrast to the North, sub-Saharan Africa demonstrated relative resilience, attracting $42 billion in FDI – a 6% decrease. However, this stability masks significant disparities. South Africa, for example, experienced negative net inflows of $6 billion due to a major divestment by Anglo American PLC, selling its stake in Valterra Platinum Ltd. This highlights the risk of capital flight and the impact of large corporate decisions on national FDI figures. Conversely, Mozambique shone with an 80% increase in investment, fueled by the resurgence of liquefied natural gas (LNG) projects. This demonstrates the potential of specific sectors – particularly energy – to drive FDI growth, but also the concentration risk associated with relying on a single industry.
The Rise of Greenfield Investments: A Positive Trend
Amidst the overall decline, a positive trend emerged: an increase in greenfield projects across the continent. Africa saw 639 new industrial projects announced in 2025, a 5% rise compared to 2024, driven by activity in Egypt and Ivory Coast. These projects, involving the construction of new facilities, represent long-term commitment and job creation, offering a more sustainable path to economic growth than portfolio investments or mergers and acquisitions. However, the sustainability of this trend remains uncertain, dependent on continued political stability and favorable investment climates.
Looking Ahead: Geopolitical Risks and Uncertain Prospects for 2026
UNCTAD’s outlook for 2026 remains cautious. While easing inflation and lower borrowing costs in major economies could stimulate global FDI flows, geopolitical tensions, policy uncertainty, and global economic fragmentation pose significant headwinds. Africa, particularly, is vulnerable to these external shocks. The continent’s increasing debt burden, coupled with political instability in key regions, could further deter investors. Furthermore, the ongoing fragmentation of the global economy could lead to a decline in cross-border transactions, impacting FDI inflows.
The future of foreign direct investment in Africa hinges on addressing these challenges. Diversifying economies, improving governance, fostering regional integration, and creating a more predictable regulatory environment are crucial steps. Countries that prioritize these reforms will be best positioned to attract the capital needed to drive sustainable economic development. The recent surge in LNG investments in Mozambique offers a blueprint, but it’s a blueprint that needs to be replicated across diverse sectors and regions.
What strategies do you believe are most critical for attracting FDI to Africa in the face of these global uncertainties? Share your insights in the comments below!