Foreign Direct Investment (FDI) continues to play a critical role in Africa’s industrialisation ambitions, providing capital inflows, technology transfer, and pathways into global value chains. However, the continent’s manufacturing sector still accounts for only a small share of investment activity, highlighting a persistent gap between economic potential and industrial performance.
Insights from the March 2026 edition of the Pan-African Manufacturers Association (PAMA) News Bulletin indicate that Africa’s investment appeal has historically been tied to its vast natural resource base.
Countries such as Nigeria, South Africa, Angola, and Ghana have attracted substantial inflows largely due to extractive industries including oil, gas, and minerals. While this resource-driven model has sustained investor interest, it has also limited diversification into higher-value industrial activities.
Africa’s demographic growth and rapid urbanisation are gradually reshaping the investment landscape. With a rising consumer base and expanding middle class, the continent is increasingly seen as one of the world’s last major underpenetrated markets.
This shift has encouraged multinational companies to expand into sectors such as retail, telecommunications, financial services, and to a lesser degree, manufacturing.
Policy reforms in several African economies — including investment liberalisation, regulatory streamlining, and improvements in the ease of doing business — have also enhanced the continent’s attractiveness to foreign investors. However, analysts note that these gains have yet to produce a significant shift toward deeper industrialisation.
Manufacturing-related FDI remains largely concentrated in low-technology and low-value-added segments such as agro-processing, basic consumer goods production, and final-stage assembly operations.
Most investments are market-seeking rather than efficiency-driven, resulting in limited integration into complex global production networks.
Investment data further illustrate the volatility of Africa’s FDI flows over the past decade. Inflows declined sharply from about $80 billion in 2021 to $45 billion in 2022 before rebounding to $53 billion in 2023. By 2024, inflows surged to roughly $97 billion, driven by large-scale projects and ongoing liberalisation reforms.
However, early estimates suggest a decline to around $59 billion in 2025 amid global economic uncertainty and weakening investor confidence. Despite periodic surges, Africa’s share of global FDI remains relatively modest, averaging between four and six percent.
Country-level performance also reveals mixed outcomes. Egypt retained its position as the continent’s leading FDI destination with inflows of about $11 billion, followed by Mozambique and Angola, largely driven by major energy investments.
In contrast, South Africa recorded negative inflows due to capital withdrawals, underscoring the fragility and uneven distribution of foreign investment across the continent.
Despite rapid global expansion in high-value sectors such as electronics and automotive manufacturing, Africa’s participation in these industries remains limited.
Analysts say the continent’s role in global manufacturing value chains remains largely upstream, focused on input-based or resource-linked activities. For example, food processing investments tend to cluster near agricultural zones, while mineral processing often occurs close to extractive sites.
These patterns have resulted in relatively shallow industrial ecosystems that lack the integrated supply chains needed for sustained industrial upgrading and large-scale job creation.
Regional trends across Africa also show uneven progress.
In North Africa, countries such as Morocco, Tunisia, and Egypt have emerged as manufacturing hubs, attracting investment in automotive assembly, textiles, and consumer goods. Their proximity to European markets and established industrial zones have been major advantages.
In West Africa, Nigeria continues to attract significant FDI overall, but manufacturing investment remains constrained by infrastructure deficits and policy inconsistencies. Meanwhile, Ghana and Côte d’Ivoire are gradually expanding investments in agro-processing and light manufacturing.
East Africa has recorded notable progress, particularly in Ethiopia, where industrial parks and competitive energy costs have supported growth in textiles, apparel, and leather manufacturing. Kenya has also strengthened its position as a regional hub for assembly operations.
Meanwhile, Southern Africa presents a mixed outlook, with South Africa attracting investment mainly in mining and automotive sub-sectors, while smaller economies sustain niche manufacturing activities.
Analysts say that for Africa to unlock the full potential of FDI, governments must focus on strengthening infrastructure, deepening regional integration, and creating policies that encourage investment in higher-value manufacturing sectors.
