FDIs to Morocco note 52% increase in 2021, as North Africa records sharp 5% decline

Foreign direct investments (FDI) to Morocco have rebounded by 52% to reach $2.2 billion in 2021, according to a UNCTAD report.

After a significant decline in the previous two years, mainly due to the COVID-19 pandemic, African countries hit a record $83 billion in 2021, according to UNCTAD’s World Investment Report 2022 published on 9 June.

This was more than double the amount reported in 2020 when the COVID-19 pandemic weighed heavily on investment flows to the continent.

Despite the strong growth, investment flows to Africa accounted for only 5.2% of global FDI, up from 4.1% in 2020, according to the report.

Flows to Morocco rose by a little over half in 2021 year on year, the biggest investment was the large international project finance deal amounting to an estimated $20 billion, for the construction of a 3,800 km transmission line to the United Kingdom with 3.6 GW of capacity, sponsored by British company, Xlinks.

Renewables and energy efficiency projects accounted for most of the growth in 2021 for both Morocco and other countries on the continent.

In terms of subregions, Southern Africa, East Africa and West Africa saw their investment flows rise while those to Central Africa remained flat and North Africa registered a decline.

Flows to North Africa fell by 5% to $9.3 billion. Egypt saw its FDI drop by 12% as large investments in exploration and production agreements in extractive industries were not repeated. Despite the decline, the country was the second largest host of FDI on the continent.

Geographically, companies in Eastern Europe and North Africa appear to face relatively more downward pressure on earnings.

The indirect effects on investment flows to developing countries will mostly depend on the extent of their exposure to the triple “food, fuel and finance” crises caused by the conflict and their consequent economic and political instability – key determinants of international private investment, said the report.

An early indication of investment prospects for individual sectors and industries can be found in the profit expectations of multinational enterprises (MNEs).

The report additionally points out the effects of the ongoing Russia-Ukraine war on global FDI trends, as since the start of the war, the majority of the top 5,000 MNEs have revised earnings forecasts for 2022.

Due to high commodity prices, extractive industries (mining, oil and gas) have revised their forecasts upward, while industries that require commodities as production inputs (such as manufacturing and construction) or that depend on fuel (such as airlines) have revised their earnings forecasts downwards.