Intra-regional investment within sub-Saharan Africa (SSA) has soared in recent years. Nigerian conglomerate Dangote has built cement plants stretching from Tanzania to Senegal. Regional players from South African telecoms group MTN to financial firms like Togo-based Ecobank have set up across the continent.

Intra-regional FDI made up, on average, 21% of SSA’s total inward FDI stock in 2020-23, up from 14.7% in 2010-19, according to World Bank analysis of data from the IMF’s Coordinated Direct Investment Survey (CDS). This was more than double the 8.5% intra-regional FDI share in Latin America and the Caribbean and four times the 4.9% in the Middle East and North Africa in the same period.  

At first glance, African firms investing across borders in their neighbours is a boost for efforts to support economic integration in the world’s poorest region. But data shows that Africa has become more reliant on FDI from its own backyard as inward FDI flows from outside the continent have declined.

Dirk Willem te Velde, director of ODI’s International Development Group, explains that a rise in the intra-regional share of FDI stock in SSA was due to a rapid decline in the level of extra-regional FDI. “This is a concern and not a cause for celebration of the level of integration on the African continent yet,” he says.

In absolute value, intra-Africa FDI stocks gradually increased from $19bn in 2010 to reach a high of $88bn in 2022 before falling back to $76bn the following year, according to ODI analysis of IMF CDS data. Between 2022 and 2023, inward FDI stock in SSA from outside the region fell from a high of $423bn to $347bn.

Since 2020, the lasting impact of the Covid-19 pandemic has weighed on FDI into Africa alongside divestments by western firms. Oil and gas majors like Eni and Equinor and pharma giant GSK have sold their assets in Nigeria. Luxury watchmaker Rolex closed its South Africa office in June 2024, while UK bank Barclays exited Africa in 2022, ending 96 years of presence on the continent.

Not a top priority 

While intra-regional FDI has become more prominent, the World Bank notes that SSA still received just 6% of net FDI inflows in 2020-23 across emerging market and developing economy regions. Matthew Ferreira, a Johannesburg-based senior consultant at Africa Practice, says that this data is evidence that “the region is not a top priority for global investors” and that “lower external interest is likely to have spurred increased intra-regional investment” on the continent. 

fDi Markets data on greenfield FDI, which is more granular than aggregate inward FDI stock, reveals that announced projects and capital expenditure (capex) within SSA are still much smaller compared with FDI from outside the region. Edward Porter, senior associate at the Africa Finance Corporation, cautions that FDI announcement data should be “interpreted very carefully” given that “most companies [in Africa] are private and very little is disclosed on investment commitments or flows”. 

More services, less extraction

Nonetheless, intra-Africa greenfield FDI is much more concentrated in IT infrastructure and services than extra-Africa FDI. 

Data from fDi Markets shows that greenfield FDI capex into SSA from outside the continent between 2020 and 2023 was concentrated in manufacturing and extraction, which accounted for 40% and 21.5% of the total, respectively. 

For intra-Africa FDI, manufacturing captures just 10.6% of capex, while 7.6% went to extraction activities. The most prominent intra-regional FDI between 2020 and 2023 were IT infrastructure (48%) and business services (13.3%), fDi Markets shows. “This divergence underscores the importance of fostering intra-African investments to stimulate growth in diverse sectors,” says Mr Willem te Velde.

One recently active African investor in business services is Lapaire, an optician looking at expansion across east and west Africa, from its base in Ivory Coast to markets like Benin, Togo, Mali, Uganda and Tanzania. Lapaire’s vision is to increase access to eyesight tests and affordable glasses, reflecting how pan-African companies see an opportunity to sell products and services to underserved rapidly growing populations. But even with greater ambitions by African companies in their own region, the continent still must do more to magnetise FDI from abroad.

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