Foreign direct investment (FDI) inflows to Africa fell by 3% to around $55-billion in 2014, amid an 8% fall in global inflows to an estimated $1.26-trillion, from $1.36-trillion in 2013.

In its Global Investment Trends Monitor, the United Nations Conference on Trade and Development (Unctad) attributed Africa’s decline largely to a decrease in FDI to North Africa, with other subregions, including sub-Saharan Africa, experiencing similar inflows to those experienced in 2013.

“FDI into Africa was buoyed by increased inflows to Mozambique driven by its potential as one of the world’s largest liquefied natural gas exporters. FDI into North Africa declined by 17% to $12.5 billion, with continued civil unrest in Libya dragging down the region's potential as an FDI host,” Unctad reported.

Africa-related cross-border mergers and acquisitions (M&A) increased by 41% to $5.4-billion, as investors looked to tap the continent’s growing consumer markets, with Nedbank’s agreement of the purchase of a 20% stake in Togo’s Ecobank for $490-million listed among the transactions concluded during the period.

Unctad said that private equity firms and Middle Eastern investors also played a greater role in Africa during 2014. “In Nigeria, significant cross-border M&A growth to $1.3-billion, especially into consumer-orientated sectors, helped counterbalance the decline in FDI to other sectors, stemming the level at $4.9-billion.”

FDI flows to developing economies remained resilient in 2014, reaching more than $700-billion, the highest level ever recorded, and accounting for 56% of global FDI flows. The increase was driven mainly by developing Asia, with four of the top five FDI recipients in the world from developing economies.

China emerged as the largest FDI recipient, with inflows rising to an estimated $128-billion.

By contrast, FDI flows to developed countries fell by 14% to an estimated $511-billion, significantly affected by America’s fall from leading recipient in 2013 to third position.

Unctad said FDI flows to the US fell to an estimated $86-billion, with M&A sales in the US declining from $60-billion in 2013 to just $10-billion in 2014, primarily owing to the Verizon-Vodafone deal.

“Trends in global FDI flows are uncertain for 2015. The fragility of the world economy . . . volatility in currency markets and geopolitical instability will act as a deterrent for investors. The decline in commodity prices will also lower investments in the oil and gas and other commodity industries,” Unctad said.

However, transnational corporations (TNCs) were expected gradually to increase strategic investments and deploy part of their record levels of cash holdings.

“Various corporate surveys point to the fact that TNCs are gaining more confidence in their business growth prospects. Stronger economic growth in the US, the demand-boosting effect of lower oil prices and proactive monetary policy in the Eurozone could support increased FDI flows. Increased investment liberalization and promotion measures will also favourably affect FDI flows.”