Africa Investing in Africa

Africa’s FDI history runs in three distinct phases.The first, from the 1970s to the mid-1990s, was characterised by low investment volumes and heavy reliance on external capital. The US, UK, and France dominated inflows, largely targeting resource extraction in West and Central Africa. Although South Africa, Egypt, and Libya began investing modestly in neighbouring economies toward the end of this period, intra-African investment remained minimal.

The second phase, from roughly 2000 to 2015, saw a major shift in the sources of foreign capital. Asia’s share of Africa’s FDI stock rose from 5% in 2002 to 23% in 2018, driven largely by China, while Europe’s share declined below 50%. During the commodity boom, inflows peaked at $98 billion in 2013 before falling with global oil and mineral prices. At the same time, intra-African FDI began to rise steadily, growing from $253 million in 2001 to $23.3 billion in 2017, before reaching a record $31.8 billion in 2021.

The third phase, still unfolding today, is defined by the growing role of African corporate and institutional capital. Intra- African FDI stock increased from $19 billion in 2010 to $88 billion in 2022. By 2023, African countries accounted for 14% of investment projects across the continent, signalling a clear — though still limited — shift toward Africa investing in itself.

Africa is not the first region to shift from external dependence to internal capital formation. East Asia did this through the “Flying Geese” model, led by Japan from the 1960s, where rising wages and industrial upgrading pushed firms to relocate factories and production lines to lower-cost economies such as South Korea, Taiwan, and later Southeast. Asia and China. These relocations transferred not just production, but also jobs, technology, supplier networks, and industrial skills, enabling recipient countries to build their own manufacturing capacity, upgrade into higher-value industries, and in turn relocate lower-value activities further down the chain over time.

Europe followed a more institution-driven version. From the 1990s, Germany and Western Europe invested heavily in Central and Eastern Europe, integrating countries like Poland, Hungary, and the Czech Republic into manufacturing value chains. EU accession and cohesion funds accelerated convergence by strengthening infrastructure, institutions, and labour capacity.

Africa is beginning to show early signs of a similar pattern. South Africa and Morocco are emerging as regional investment hubs, expanding capital and supply chain linkages into neighbouring economies. However, this progress remains constrained by weak integration architecture, including limited capital mobility, fragmented regulations, and weak cross-border enforcement.

The AfCFTA is designed to address these gaps by creating a more unified market. Whether it can do so quickly and effectively enough to shift the continent’s investment trajectory remains one of Africa’s defining policy questions.

African investors accounted for 14% of all investment projects on the continent in 2023, but less than 3% of total capital deployed and about 5% of jobs created (EYAfrica)This imbalance highlights a clear structural issue: African firms are increasingly investing across borders, but with limited financial capacity.

The sectoral difference is equally important. Unlike external FDI, which remains heavily concentrated in extractive industries, intra-African greenfield investments are increasingly directed toward financial services, manufacturing, logistics, telecommunications, and digital infrastructure. In simple terms, external capital extracts value, while African capital builds systems.

The scale of the financing gap is significant. The AfDB estimates Africa requires between $130 billion and $170 billion annually to address its infrastructure deficit alone. Against this benchmark, total intra-African FDI stock of $76 billion highlights the scale of the capital mobilisation still required. This mismatch shows that Africa’s key constraint is not investment activity, but insufficient capital depth. Closing this gap remains one of the continent’s most important financial challenges over the next decade.

Within this landscape, South African firms are the largest source of intra-African investment by scale, followed by Morocco and Egypt. Nigeria and Kenya are also emerging as increasingly important regional investors, particularly in banking, fintech, and telecommunications.

Africa’s key development institutions; AfDB, AFC, and Afreximbank operate at scale but remain heavily dependent on external capital. Non-African shareholders account for about 40% of AfDB voting power, while AFC and Afreximbank rely significantly on international bond markets and global institutional investors. As a result, they are African-led but not yet primarily Africa-funded, limiting their independent financing capacity.

Despite this, they are central to financing Africa’s development by mobilising capital and de-risking infrastructure and trade.

The AfDB plays a catalytic role through platforms like the Africa Investment Forum, which generated $29.2 billion in deals in 2024 and $15.3 billion in 2025. AFC directly finances infrastructure, raising over $900 million in 2025 through Samurai and Shariah facilities and co-launching a $1.5 billion infrastructure fund with AUDA-NEPAD. Afreximbank anchors trade finance, supporting systems like PAPSS, managing the $10 billion AfCFTA Adjustment Fund, and enabling growth in intra-African trade.

Together, these institutions are expanding Africa’s financial architecture by improving liquidity, reducing risk, and enabling cross-border investment and trade.