According to UNCTAD Investment Report 2017 “ FDI flows to Africa continued to decline in 2016.” It stated “sluggish commodity prices have diminished economic prospects in Sub-Saharan Africa and tempered investor interest in the sub region.
However, according to the report, “some diversified producers of East Africa registered strong FDI in 2016, with Ethiopia attracting more inflows than ever before. In doing so Ethiopia stood out to become one of the largest recipients of FDI in the continent posting strong and record growth (up 46 per cent to $3 billion) and became the second largest LDC host economy, up from the fifth position in 2015. According to the report much of this achievement is derived from investments in infrastructure and manufacturing. The report also stated that , the largest cross-border M&A sale of the year ($510 million) was also recorded in Ethiopia, with Japan Tobacco acquiring a local cigarette manufacturing facility.
According to the report “Ethiopia attracted new FDI in manufacturing, which could create opportunities for local SMEs to link to global supply chains.” Ethiopia is also cited by the report as one of the top performers in its efforts to diversify its economy and consequently its FDI pool against extractive investment that hitherto African and land locked economies are known for. According to the report “despite the persistent weight of natural resources in FDI to LLDCs, diversification of inflows is advancing, especially in economies that have recently attracted sizeable FDI, such as Ethiopia.” The report also states “although China was one of the major sources of FDI, foreign investors from other economies have started investing more in Ethiopia’s agro-processing, hotels and resorts, as well as in its manufacturing activities.”
Similarly, even though the report outlines a slight decline in FDI inflows to landlocked developing countries (LLDCs), and these countries continue to play only a marginal role in the global FDI scene, Ethiopia stands out among these groups of countries by continuing in its positive trajectory for a fourth consecutive year.