- FDI to the continent dropped to $38 billion from $46 billion in 2019.
- End year Soundness report by the Capital Market Authority (CMA) shows foreign investor outflow of Sh28.6 billion.
Coronavirus slowed the flow of foreign investors into Africa last year, with the value of investment dropping 18 per cent to $38 billion from $46 billion in 2019.
The latest Investment Trend Monitor by the United Nations Conference on Trade and Development (UNCTAD) expects global Foreign Direct Inflow (FDI ) to remain muted due to uncertainty over the evolution of the Covid-19 pandemic.
Although the report lacks data on Kenya, flows into the country are likely to have been even lower than in 2019 when FDI decreased 18 per cent to $1.3 billion from $1.6 billion in 2018.
The Capital Market Authority's (CMA) end year Soundness Report shows foreign investor outflow of Sh28.6 billion.
This, despite several new projects in information technology and health care.
“The effects of the pandemic on investment will linger. Investors are likely to remain cautious in committing capital to new overseas productive assets,'' James Zhan, director of UNCTAD’s investment division said.
According to UNCTAD data, global FDI collapsed in 2020, falling 42 per cent from $1.5 trillion in 2019 to an estimated $859 billion.
Such a low level was last seen in the 1990s and is more than 30 per cent below the investment trough that followed the 2008-2009 global financial crisis.
The report shows the decline in FDI was concentrated in developed countries, where flows plummeted by 69 per cent to an estimated $229 billion, with the US relegated to the second position globally by China.
The US recorded a 49 per cent drop in FDI, falling to an estimated $134 billion while China's inflows rose by four per cent to $163 billion, catapulted by increased investments in high tech.
The decline in the US took place in wholesale trade, financial services and manufacturing. Cross-border mergers and acquisition sales of US assets to foreign investors fell by 41 per cent, mostly in the primary sector.
''A return to positive GDP growth of 2.3 per cent and the government’s targeted investment facilitation programme helped stabilize investment after an early lockdown in China,” the report says.
Although FDI flows to developing economies decreased by 12 per cent to an estimated $616 billion, they accounted for 72 per cent of global FDI – the highest share on record.
The fall was highly uneven across developing regions: -37 per cent in Latin America and the Caribbean, -18 per cent in Africa and -4m per cent in developing countries in Asia.
The report warns that “the far more limited capacity of developing countries to roll out economic support packages to stimulate investment in infrastructure will result in an asymmetric recovery of project-finance-driven FDI.
UNCTAD expects any increases in global FDI flows in 2021 to come not from new investment in productive assets but from cross-border M&As, especially in technology and healthcare – two industries affected differently by the pandemic.
“Although their investment activity slowed down initially in 2020, they are now set to take advantage of low-interest rates and increasing market values to acquire assets in overseas markets for expansion,''the report says.