Friday, October 11, 2019

Who Is Africa's Largest Investor: the United States or China?

Ernst and Young published in September 2019 its "EY Attractiveness Program Africa."

One section of the report discusses Africa's 10 largest investors during the years 2014-2018. In terms of number of projects, it ranks the US first at 463 projects, France second at 329 projects, the UK third at 286 projects, and China fourth at 259 projects. It concludes that the US and France remain Africa's single largest investors, adding that China is increasingly becoming a force to be reckoned with.

In terms of the amount of capital invested, however, Ernst and Young report that the US invested during 2014-2018 $31 billion, France $34 billion, the UK $18 billion, and China an astounding $72 billion. The capital figure for China is many times higher than any number cited by the Government of China or any other source that I have seen recently. It raises a serious question as to its accuracy but, if accurate, why China is not considered Africa's largest investor during this period.

To its credit, Ernst and Young does explain how it arrived at its numbers. An investment in a company is normally included in FDI data if the foreign investor acquires more than 10 percent of the company's equity. FDI includes equity capital, reinvested earnings, and intra-company loans. Ernst and Young says its figures also include investments in physical assets. All of its FDI numbers are sourced from FDI Intelligence 2019.

As someone who has tried to follow China's FDI in Africa for more than a decade, I am as confused as I was a decade ago.