Given the youth and growing population, Africa represents a huge potential market for FDI. The region has been more consistently profitable, on average, than any other region of the world. 12.9%, the annualized return of the 40 biggest companies south of the Sahara over the past year, was the continent’s largest annual return in two decades. The continent is in the midst of an investment gap that will need an estimated $170 billion per year to meet its infrastructure demands.
The changing tides of global commerce are making Africa an increasingly attractive place to do business. As the United States continues to selectively retreat from international trade markets, new and unexpected trade relationships are taking their place. Together, these shifts are producing new opportunities for FDI in Africa, and investors are looking to get their cut of the region’s potential.
African nations are proving to the world that they are serious about setting the stage for a more predictable, reliable business climate. New pro-business reforms and state policy initiatives are picking up momentum, creating a climate rich for investment. FDI is projected to be an important driver in assisting African countries to grow. It will give them the tools that they need to accomplish those social, environmental, and economic objectives.
Despite Africa’s promising prospects, challenges remain. Access to international credit markets and establishing equitable investment conditions are critical hurdles that need to be addressed to enhance the region’s economic development. Specifically, capital expenditure on opened African projects exploded by 24% in 2024 compared to one year prior. If current trends continue, projections show a staggering 34% decline in 2025.
That changed in January 2025 when a continent-wide victory occurred in which 48 countries ratified Africa’s Continental Free Trade Area, AfCFTA. This landmark agreement takes the continent further to creating an integrated single market for goods and services among 54 countries. The UAE and Kenya recently signed a CEPA, and this provided an encouraging signal. This compact is designed to accelerate innovation across target industries, including agriculture, retail, healthcare, financial services, technology, and tourism.
As part of ongoing efforts to enhance infrastructure, Uganda secured $800 million in financing from the Islamic Development Bank in May 2025. This funding will enhance our railway infrastructure. An example of how the value of these types of international partnerships should be used to solve local problems.
Over the last several months, investor sentiment has been anything but stable. On the first week of April, the CBOE Volatility Index jumped to a recent high of 40. It calmed down to 22.8 at the close of Q1 2025. Total FDI projects announced have witnessed a downward trend of 16% YoY and 24% QoQ in Q1 2025. Right now we’re stuck with those disappointing delays, the good news is that project announcements are booming. Investors are coming to understand that Africa offers unmatched potential for high returns.