Introduction

Over the last two decades, FDI inflows to Africa have surged by 482%, from US$9.1 billion in 2000 to US$53 billion in 2023 and reached an estimated US$94 billion within the first three quarters of 2024. This impressive growth reflects the continent’s ability to deliver significant returns to foreign investors.

Behind Africa’s FDI growth lies a unique trifecta: geography, geology, and geopolitics, which has consistently appealed to investors. Indeed “fortune favours the bold,” but the real question remains: how and why do these bold investors continue to place their bet on Africa’s three ‘geos’ despite the continent’s challenging economic landscape?

Geography

Africa’s geography serves as the world’s logistical heartbeat and a bridge connecting global markets. One of the continent’s major geographical advantages is the Suez Canal, an artificial sea-level artery connecting the Mediterranean Sea to the Red Sea. This engineering marvel facilitates over $1.6 trillion in global trade annually. By cutting down travel times for vessels moving between Europe and Asia, the canal provides significant cost savings, thereby strengthening Africa’s position as a key link in global supply chains. It is therefore no surprise that Northern Africa attracted the highest share (26%) of Africa’s total FDI inflows in 2023, having the closest proximity to European markets and integration into regional production networks.

Beyond the northern gateway, coastal nations such as Kenya and South Africa also serve as critical logistical hubs for both intra-African and international trade, attracting significant FDIs in industries such as transportation and storage. Kenya’s Port of Mombasa, one of the largest and busiest ports in East Africa, and its expansion projects like the Lamu Port and Mombasa-Nairobi Railway, have positioned the country as a gateway for trade between Africa and the world. Similarly, South Africa’s strategic location at the southern tip of the continent, and its extensive transport network, serves as a critical node for both regional and international trade. This further influences South Africa consistently ranking as one of the highest recipients of FDI in Africa, attracting over US$55 billion in FDI inflows between 2020 and 2023.

Landlocked nations, seen as geographically disadvantaged due to lack of coastlines, are rewriting their narratives by leveraging regional infrastructure improvements to connect to global markets. Uganda, for instance, is enhancing its trade capacity through ambitious infrastructure projects such as the Standard Gauge Railway (SGR), which connects Uganda to neighbouring countries such as Kenya, Rwanda, DR Congo and South Sudan. This road and rail infrastructure, once completed, is expected to strengthen the business case for investing in East Africa, opening doors for foreign investments.

Geology

Africa’s geology is a jackpot of natural resources, offering significant investment opportunities. Between 2010 and 2014, resource-rich economies such as Angola, Mozambique and Zambia attracted billions in FDI, as international mining companies sought to tap into Africa’s rich vein of oil, gas and minerals. In fact, Angola’s economy remains heavily reliant on its oil reserves, with crude oil exports constituting over 90% of total exports in 2023. Similarly, Botswana’s diamond sector accounted for 91% of its exports, reinforcing the role of geology in sustaining Africa’s FDI appeal. Zambia has also leveraged its position as a copper producer to attract FDI into its mining sector.

Between 2020 and 2023, greenfield investments in the continent’s extractive industries surged to US$16.6 billion from US$1.1 billion in 2020, while energy and gas supply also saw a remarkable growth from $10.3 billion, peaking at $88.0 billion in 2022. Within the same period, international project finance in oil & gas and mining sectors reached US$13.9 billion and US$8 billion, respectively. Beyond mining and oil & gas, Africa’s arable land has also attracted significant agricultural investments, making it a key player in global food security.

Africa’s geology is also central to the global energy transition. The continent features some of the world’s largest reserves of cobalt and lithium, which are critical components for electric vehicle batteries. Countries like the DR Congo and Zimbabwe are becoming hotspots for green-energy investments as trade counterparties seek to secure their supply chains for the future.

Geopolitics

Africa’s geopolitical landscape is a dynamic canvas of shared history, regional cooperation, and strategic global alliances. While natural resources and strategic geography are vital, it is geopolitics that creates an enabling environment for FDI inflows.

The African Continental Free Trade Area (AfCFTA) is one of the geopolitical game changers for Africa, representing the largest free trade area in the world. By reducing regulatory barriers and expanding trade corridors, the AfCFTA opens a US$3.4 trillion market, offering investors access to an integrated and expansive consumer base of over 1.3 billion people. Projections indicate that the AfCFTA could drive a substantial 111%-159% increase in FDI inflows to Africa.

Further, Africa’s recent permanent membership in the G20 signifies a new era of geopolitical importance. This intergovernmental forum gives Africa a stronger voice in shaping global investment policies, while aligning its development goals with global FDI priorities. In other words, by bridging global and local interests through the G20, Africa is positioning itself as a strategic partner for international investors.

African governments have also undertaken significant reforms to improve their investment climates, including streamlined regulatory frameworks, tax incentives, and public-private partnerships, all of which have lowered barriers to entry for foreign investors. For instance, Rwanda’s “one-stop-shop” approach to business registration has positioned it as one of the top-performing African nations, after Mauritius, in the World Bank’s Ease of Doing Business Index, setting the benchmarks for investor-friendly reforms. Additionally, politically stable environments in countries such as Botswana and Ghana offer a reliable foundation for sustainable, long-term investments.

Conclusion

The unique interplay of Africa’s geography, geology, and geopolitics, is slowly but steadily, steering the continent towards a new era of inclusive, sustainable, and transformative growth. Despite Africa’s challenging FDI landscape in recent years, the continent remains a compelling investment case, offering market-leading returns and significant developmental gaps. Therefore, for investors seeking to ride the next wave of global opportunity, Africa is where the horizon beckons.