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FDI in Africa as The New Frontier

Africa is currently leading the opportunities for International Investors looking beyond developed economies. Global trends in Foreign Direct Investment (FDI) show a continuing atrophy in developed economies from 2004 onwards up until 2019 with nothing indicating a reversal of the trend according to the UNCTADs World Investment Report of 2019. Notwithstanding, Africa has continued to grow against the global trend up 2% to $706 Billion per year accounting for 54% of the global recorded growth according to the report. These trends may be said to support the notion that for FDI Africa is The New Frontier. These trends back up the notion that Africa continues to present an opportinity for portfoilio diversification and increased expected returns through FDI for companies and individuals astute enough to take advantage of the big melting pot of ooportunities the market presents. Lower input costs for projects as compared to developed countries and the ability to vastly improve profitability through value addition makes an appetising prospect to FDI leaders. It has long been the case that information asymetry has been a stumbling block to FDI in Africa, but with the transposition of information technology, a growing number of technocrats and new intellectuals with a keen understanding of business both at local and international level, intelligent FDI is becoming a reality. According to the report Africa already saw FDI of $46 Billion in 2019 in mining resources and with 70% of that being through Mergers and Acquisitions of and with local stakeholders. As a result different country risks have been succesfully managed through these means. Zimbabwe for example does not rank highly on the ease of doing business rankings but through the right chanels FDI leaders can benefit from embarking on Greenfield projects in areas involving resources and Special Economic Zones. Countries like Zimbabwe present opportunity for FDI both as an addition to emerging portfolios or a new one investing in The New Frontier. By Taka Gambe, Partner GLG

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