Advisory and professional services firm EY's eleventh Africa Attractiveness Report found that clean technology led the foreign direct investment (FDI) drive into Africa against a backdrop of a substantial overall recovery of FDI on the continent.

Technology services attracted the second-most FDI and business services placed third in terms of investment attractiveness. The overall report found that Africa attracted 733 projects, a 64% increase over the prior year, worth $194-billion, and created 154 000 jobs.

“Clean technology FDI is being driven by a green revolution sweeping across Africa,” said EY partner and Africa region government and infrastructure leader Sandile Hlophe.

“Although the business services sector creates the most projects, clean technology FDI brings in more capital and is also ahead in the number of jobs it creates. Africa is clearly beginning to harness its renewable energy infrastructure,” he said.

“South Africa, Egypt, Morocco and Kenya account for nearly 75% of all renewable energy investment since 2010, amounting to $46-billion.

“However there remains a huge deficit of clean energy like solar and wind, with fossil fuels still making up the bulk of Africa’s power generation,” Hlophe said.

Additionally, the International Renewable Energy Agency (Irena) and the African Development Bank (AfDB) estimate the continent’s solar photovoltaic potential at 7 900 GW, hydropower at 1 753 GW and its wind energy potential at 461 GW.

South Africa attracted the most FDI projects in Africa, making up 23% of the continent’s total at 157, and this is also the highest number since 2016. The FDI was valued at $26.8-billion and created approximately 15 000 jobs.

South Africa was the third-largest recipient of clean technology FDI into Africa, trailing only Egypt and Morocco.

As the energy crisis continues, the shift from the national grid escalates the need for alternatives. South Africa is expected to increase its share of renewable energy to 41% by 2030, the EY report said.

“South Africa’s FDI creates the most jobs in the region by a considerable margin and attracts the bulk of the region’s capital, despite its weak economic performance and growth outlook,” Hlophe noted.

By source, the US and the UK were the largest investors, followed by Switzerland and Germany. The UAE has also increased its presence, investing in clean technology capital-intensive projects valued at $50-billion, and accounting for three-quarters of the country’s total inflows. FDI from the UAE created 3 000 jobs in the country.

“Business services, along with technology, dominate South Africa’s FDI, with the real estate sector generating the most capital and employment,” Hlophe added.

Meanwhile, Africa’s FDI halved in 2020, making it the hardest-hit region globally, although it has since bounced back, particularly within the North and Southern African hubs.

“North Africa attracted more FDI than any other region in Africa, led by Egypt. North Africa attracted the most investment projects, at 248, which is 112% up on 2021, with record capital investment of $130-billion creating 89 000 jobs,” said Hlophe.

In Southern Africa, Zimbabwe attracted $5.2-billion in FDI and Zambia received FDI of $1.7-billion.