Africa’s ability to attract foreign capital suffered a major setback in 2025, as new data showed that the continent recorded one of the sharpest declines in Foreign Direct Investment (FDI) globally, despite a recovery in overall global investment flows.
The figures have reignited concerns about Africa’s competitiveness at a time when capital is becoming more selective, technology-focused, and geopolitically cautious.
Preliminary estimates released by the United Nations Conference on Trade and Development (UNCTAD) indicate that FDI inflows into Africa fell by 38 per cent in 2025, a dramatic reversal from the modest gains recorded the previous year.
The decline came even as global FDI rebounded by 14 per cent, underscoring Africa’s growing struggle to retain investor confidence amid shifting global priorities.
Total FDI inflows into the continent dropped to about $56bn in 2025, down from $96bn in 2024.
While the figure broadly mirrors levels seen in 2023, analysts say the sharp year-on-year swing highlights the fragility and volatility of investment flows into African economies.
Africa FDI Inflows Slump Despite Global Recovery
UNCTAD attributed the steep fall largely to large-scale divestments, particularly in South Africa, Africa’s most industrialised economy.
According to the report, investment activity weakened across several strategic sectors, including mining, infrastructure and emerging clean-energy segments such as green hydrogen.
“FDI inflows dropped sharply by about one third, reflecting a return to prior levels after inflated numbers in 2024 driven by a single large project,” UNCTAD noted, adding that Africa’s overall performance masked stark differences between individual countries.
South Africa recorded one of the most significant reversals, posting negative inflows of about $6bn in 2025. The contraction followed a major corporate restructuring, including Anglo American Plc’s $7.2bn spin-off of its majority stake in Valterra Platinum Limited.
UNCTAD described the development as the single biggest factor behind Africa’s poor FDI showing, particularly among middle-income economies.
Despite the broad downturn, some countries demonstrated resilience.
Angola returned to positive territory after nearly a decade of net divestments, attracting an estimated $3bn in FDI. The improvement reflects renewed investor interest in the country’s oil and gas sector, alongside gradual macroeconomic stabilisation.
Mozambique emerged as one of the continent’s standout performers, recording an estimated 80 per cent surge in FDI inflows to about $6bn.
The growth was driven largely by the resumption and acceleration of construction activities on major liquefied natural gas (LNG) projects, which had previously been stalled by security concerns.
Egypt retained its position as Africa’s largest FDI destination, drawing an estimated $11bn in inflows.
The North African economy benefited from large-scale infrastructure investments, real estate developments, and continued reforms aimed at improving the business environment, although analysts caution that currency pressures and debt challenges remain key risks.
Nigeria, Africa’s largest economy, posted a modest improvement toward the end of the year after a sluggish start. While overall inflows remained subdued, policy reforms in the foreign exchange market and renewed interest in selected sectors such as energy and telecommunications helped stabilise investor sentiment.
Beyond Africa, the report painted a sharply contrasting picture for developed economies.
Global FDI flows into advanced economies surged by 43 per cent in 2025 to about $728bn, driven mainly by a rebound in Europe and major financial hubs.
The European Union alone recorded a 56 per cent increase, supported by large cross-border mergers and acquisitions and improved economic performance in countries such as Germany, France and Italy.
In contrast, FDI flows to developing economies edged down by 2 per cent to $877bn, with lower-income countries bearing the brunt of the slowdown.
UNCTAD reported that nearly three-quarters of least developed countries experienced stagnant or declining investment inflows, reflecting rising global risk aversion.
The report also highlighted a growing concentration of global investment in capital-intensive and technology-driven projects, a trend that continues to disadvantage many African economies.
Data centres accounted for more than one-fifth of global greenfield investment values in 2025, with announced projects exceeding $270bn. These investments were largely concentrated in countries with advanced digital infrastructure and stable regulatory frameworks.
France, the United States and South Korea led as host destinations for such projects, while emerging markets including Brazil, India, Thailand and Malaysia also captured significant inflows.
Africa, by contrast, attracted only a marginal share, reflecting persistent gaps in power supply, connectivity, and policy predictability.
Economists say the Africa FDI inflows slump highlights the urgent need for structural reforms, regional integration and targeted investment strategies.
While commodity-driven investments continue to dominate inflows into many African countries, global capital is increasingly favouring sectors linked to artificial intelligence, clean technology and advanced manufacturing.
Looking ahead, UNCTAD warned that downside risks to global investment are intensifying. Although FDI flows could rise modestly in 2026 if financing conditions improve and cross-border dealmaking recovers, real investment activity is expected to remain under pressure.
“Geopolitical tensions, policy uncertainty and economic fragmentation continue to weigh on investor confidence,” the organisation said, cautioning that without coordinated global and regional action, investment flows could become increasingly concentrated in a handful of regions and sectors.
For Africa, the challenge is not only to reverse the current FDI slump but to reposition itself within a rapidly evolving global investment landscape.
Analysts argue that accelerating reforms, strengthening institutions, improving infrastructure and deepening regional markets will be critical if the continent is to compete effectively for long-term, productivity-enhancing capital in the years ahead.
