Technology gobbles up Sh1.8t in FDI
Services and technology sectors have emerged as the next frontier for foreign direct investments taking 65 per cent of total capital deployed into the country.
The Ernest & Young Africa Attractiveness report 2021 estimates that from the Sh2.85 trillion directed towards projects in Africa last year, Sh1.8 trillion went to the new edge services.
Frank Mwiti, Eastern Africa market leader for EY says, a new trend is emerging in the Kenyan investment scene whereby most FDI funds are being channelled to spur technology.
New edge services
“We are seeing a huge increase in investments in non-traditional sectors, a lot of FDI is going to the services sector and technology space. This is away from extractive industries like minerals and natural resources. What this means is that African States which are highly reliant on commodities are now receiving less FDI,” Mwiti said during the launch of the report yesterday.
The total numbver of projects financed by FDIs in 2020 were 516, with 367 of these investments being in the nontraditional sectors. This is a drop from the 1,029 projects recorded in 2019.
From the 69,000 jobs that were created over the period 51,750 of these went to the nontraditional sector. “72 per cent of all projects and capital went to the services sector 24 per cent to the industry 4 per cent went to the extractives” Mwiti said.
The report which is derived from insights on foreign direct investment perspectives in Africa revealed that major African economies like Kenya, Nigeria, Morocco, Angola and South Africa took a beating from the pandemic.
Tanzania and Ethiopia were the only countries that recorded growth during the period.
Morocco recorded a 7.1 per cent drop in its gross domestic product (GDP) followed by South Africa at 6.4, Angola 5.2 and Nigeria contracted by 1.8 per cent.
Kenya recorded a 1.4 per cent drop over the period but is expected to rebound to 5.1 per cent in the 2021 financial year.
Mwiti however said that despite reduced economic activities in regional economies, Kenya is better poised to reap from the change in investor preferences since its economy is diversified. “Diversified economies recorded higher FDI flows,” Mwiti said.