Africa: ‘Greenfields’ Investment in Africa is Up, but Much More Needed in Renewables

Cape Town — Newly-released statistics from the United Nations agency responsible for promoting economic growth in developing countries show a substantial increase in investment in new projects in Africa in 2022. At the same time the agency is calling for action to help developing countries to transition to clean energy.

The UN Conference on Trade and Development (UNCTAD) said in its World Investment Report released on July 5 that the value of so-called “greenfield” projects in Africa in 2022 rose nearly four times over the figure for 2021, from U.S.$52 billion to a record $195 billion.

Alongside this, it also reported more sobering news on what are classified as foreign direct investment flows to Africa. UNCTAD announced a headline figure for foreign direct investment (FDI) of $45 billion, down 44% over the figure for 2021 – although the 2021 number was inflated by a single financial transaction involving “a large corporate reconfiguration” within a firm in South Africa in 2021. “Excluding this deal, the change in FDI flows to Africa in 2022 would have increased by seven per cent,” the agency reported.

Reporting in more detail on new, greenfields investment, UNCTAD said six of the world’s top 15 new “megaprojects” – those valued at more than $10 billion – announced in 2022 were in Africa. The number of projects rose by 39 percent to 766.

While the highest number of new projects were announced in the information and communications sector, the biggest increases in value were in energy and gas supply investments, to $120 billion, construction, to $24 billion, and extractive industries, to $21 billion.

The report said much of the growth in renewables in recent years has occurred in economically developed nations. Globally, developing countries need to triple investments in renewable energy. In an appeal issued with the report, UNCTAD called for urgent support to help these countries attract significant investments in clean energy.

“Total funding needs for the energy transition in developing countries are much larger and include investment in power grids, transmission lines, storage and energy efficiency,” UNCTAD said.

The agency’s Secretary-General, Rebecca Grynspan, said a significant increase in investment in sustainable energy systems in developing countries was crucial if the world is to reach its climate goals by 2030.

Reporting on foreign direct investment, the UNCTAD report revealed widespread divergences by region and country in 2022 compared to 2021.

In Southern Africa as a whole, FDI returned to its previous levels, discounting the anomalous 2021 deal. In South Africa it dropped to $9 billion, below the 2021 level but double the average of the last decade. In Zambia, after two years of negative values, FDI rose to $116 million.

In East Africa, Ethiopia remains the second largest recipient of foreign direct investment in the continent, but FDI decreased by 14% to $3.7 billion. In Uganda it grew by 39% to $1.5 billion, where investment was in extractive industries, and in Tanzania it grew by eight percent to $1.1 billion.