BETWEEN 1998 and 2010, Nigeria and other African countries attracted $554 billion Foreign Direct Investments (FDIs), according to a report just released by KPMG Africa.
The report was released yesterday, at the ongoing World Economic Forum on Africa 2012, which is expected to end today in Addis Ababa, Ethiopia.

According to the report titled:  “African Emergence—The Rise of the Phoenix”, revealed new themes around the three mega-trends currently shaping business in Africa, specifically high demand for natural resources, increased consumerism by an emerging African middle class and large-scale investments in infrastructure.

Though the report stated that FDIs in Nigeria, Kenya, South Africa and other African countries increased dramatically over the last decade, from $110 billion at the end of 1998 to $554 billion at the end of 2010, it noted that the overall FDIs were still relatively small compared to other emerging market economies.

According to the report China alone attracted $578.8 billion at the end of 2010, more than all African countries combined, while Brazil had FDI worth $472.6 billion within the same time.
The report said empirical evidence has indicated that in a few years time, South Africa may no longer be the largest economy on the continent, as Nigeria and other countries are likely to close the gap.

Commenting, the Chairman, KPMG Africa Limited, Yunus Suleman said, “FDIs are essential component of Africa’s sustainable, positive future. And it’s good for investors too. There is undoubtedly money to be made in Africa, which is recognised today as one of the world’s most attractive high growth markets.”
Suleman said that improvement in the business, political and macroeconomic environments across the continent have made African economies more attractive for FDIs than ever before.

He explained that the end of the Cold War which ended in more than two decades ago brought new freedom to Africa, adding that people started to demand political representation, beside calling on governments to be more transparent.

In his own remarks, CEO, KPMG, East Africa, Josphat Mwaura said Unlike China, India and Brazil, Africa is a continent of 54 very diverse countries, each with its own natural and cultural endowment as well as regulatory environment to be navigated through.  He noted that whilst regional economic integration was creating greater economies of scale and lesser complexity, doing business in Africa required a deep understanding of the landscape and experience in translating the immense opportunities into rewarding returns.

“Without this direction, many international investors have burnt their fingers and somewhat contributed to the earlier skepticism about the prospects of the continent. Those who have been guided through the complexity of Africa have realised premium returns unseen anywhere else in the world and are part of the emerging story of Africa as a priority investment destination”, he stated.

Mwaura explained that Africa still exports mainly minerals and hydrocarbons. He said the top five hydrocarbon exporters namely Algeria, Angola, Egypt, Libya and Nigeria account for 50 per cent of all exports from Africa and have experienced an 89.2 per cent increase between 2001 and 2010, mostly due to an increase of petroleum exports.

According to him, of all oil exports from Africa, Europe and the United States account for about a third, with gradually decreasing amounts during recent years, adding that China and India has most of the market share and have maintained robust economic growth rates despite the global financial crisis.
“Demand for non-oil commodities from Africa, such as gold, platinum, diamonds, iron and copper are equally shifting from Europe and the United States mainly to China. By the end of 2010, 12.9 per cent of Africa’s non-oil exports went to China, almost five times more than 10 years earlier. This dependence on exports of natural resources makes Africa vulnerable to volatility of global commodity prices”, he stated.