Global Investment Trends and Africa’s Struggles
The first half of 2025 has seen a significant shift in global investment patterns, with Africa experiencing the steepest drop in foreign direct investment (FDI). This decline is attributed to a combination of economic headwinds and investor uncertainty that have disrupted capital flows across multiple sectors.
Record Decline in FDI Inflows
Africa’s FDI inflows fell by 42 percent to $28 billion during the six months ending in June, compared to $48 billion in the same period in 2024. This represents the sharpest regional decline amid a modest three percent global slowdown. The United Nations Conference on Trade and Development (UNCTAD) noted that this dip reflects a widespread “wait-and-see” attitude among investors, who are unsettled by escalating trade wars and geopolitical tensions.
Key Points:* The global investment climate remains challenging for sectors critical to achieving the Sustainable Development Goals (SDGs).* Investments in renewable energy and infrastructure continued to decline.* Investment in health and agriculture sectors increased, though both remain at relatively low levels.
Defying the Trend in 2024
Despite the current slowdown, Africa had previously defied the global trend in 2024, attracting $96 billion in FDI, a 71 percent rise largely boosted by the $35 billion Ras El-Hekma mega-project in Egypt. This project remains the continent’s largest single FDI deal to date.
However, the current situation shows a different picture, with investment in greenfield projects—those developed from scratch—falling even more sharply, plunging 58 percent. Meanwhile, financing for ongoing projects by international investors rose by a modest one percent.
Regional Comparisons
Globally, the closest decline to Africa’s was recorded in Europe, where inflows dropped 25 percent to $82 billion. Other regions, notably developed economies, saw modest growth driven by cross-border mergers and acquisitions.
Regional Growth Highlights:* North America posted a five percent rise to $176 billion.* Asia’s FDI grew seven percent to $322 billion.* Latin America and the Caribbean recorded the fastest growth, up 12 percent to $93 billion.
Sectoral Shifts and Challenges
A glaring trend not just across Africa but globally is the sluggish performance in sectors that have traditionally been the most attractive to foreign investors. Across the developing world, manufacturing and energy and gas supply sectors saw disruptive declines in investments by 36 percent and 32 percent respectively, after a two-year growth streak in both industries.
Contrastingly, the manufacturing industry in developed countries rose by 34 percent, as service sectors like ICT and electronics, especially semiconductors, saw a marked rise in investments amid the escalating trade wars.
Impact on Sustainable Development Goals
The UN agency warns that investments in the sectors crucial to the realisation of the SDGs have taken an alarming downturn, derailing efforts to attain those goals, especially in developing countries.
Key Observations:* The number of SDG-related investment projects in developing countries fell by 10 percent.* Funding for infrastructural projects through international project finance was subdued, registering an overall global decline of nine percent.
Factors Contributing to the Decline
According to UNCTAD, the continued slump in international finance during the first half of 2025 was mainly driven by the high cost of capital, as interest rates are expected to remain higher for longer. Economic and geopolitical uncertainties have increased risk, while structural shifts across sectors continue to create financing gaps.
For Africa, the global uncertainties and economic headwinds didn’t just spook prospective investors, but also existing ones, sparking record exits especially in companies that benefitted from foreign capital injection.
Investor Exits in Africa
According to the Africa Venture Capital Association, exits by international investors from African companies rose by seven percent to 27 in the six months to June, compared to a similar period last year.