Africa: Strong FDI Growth and Shifting Patterns
Record-High FDI Inflows
Africa has experienced a significant surge in foreign direct investment (FDI) in 2024, with inflows reaching an estimated $97 billion — a 75% increase year-on-year. Even after excluding a very large project in Egypt, inflows still grew around 12%. This indicates robust investor confidence in Africa’s emerging markets.
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Diversification Across Sectors
European investors remain the largest source of FDI, followed by the United States and China. Investment is increasingly moving beyond traditional infrastructure to renewable energy, software/IT services, and business services, reflecting Africa’s digital and green potential.
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Regional Dynamics
Intra-African investment — investments by firms from within Africa into other African markets — has grown significantly, showing a maturing regional investment ecosystem.
Policy and Integration Boost
Trade and integration initiatives like the African Continental Free Trade Area (AfCFTA) are designed to reduce trade barriers, harmonize regulations, and promote business confidence, which helps attract more foreign capital.
FDI Volatility in South Africa
South Africa has seen fluctuating investment patterns, with notable FDI outflows tied to corporate restructuring, though foreign investment in sectors such as media and broadcasting still shows inflows.
Latin America: Moderate Growth with Sector Shifts
FDI Growth but Slowing New Flows
Latin America’s FDI rose by about 7.1% in 2024, totaling nearly $189 billion, but new investment flows have stagnated, highlighting concerns about long-term investor appeal. Brazil and Mexico remain the largest recipients of foreign investment.
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Startups and Innovation Investment
Investments in Latin American startups rose significantly (about 26% in 2024), driven by digitalization, youth population growth, and evolving venture capital — with fintech as a major sector.
Structural Challenges
Structural barriers like market concentration and logistics inefficiencies continue to constrain competitive pressures and productivity.
Effective Market Entry Strategies
To harness opportunities in Africa and Latin America, companies typically use a mix of strategies tailored to both macro trends and specific local conditions.
Exporting and Trade Partnerships
Low-commitment entry via exports is ideal when testing new markets. Leveraging regional trade agreements (e.g., AfCFTA in Africa and trade blocs like Mercosur in Latin America) can reduce tariff barriers and access broader markets.
Joint Ventures and Strategic Alliances
Partnering with local companies allows foreign investors to share risks, gain market knowledge, and navigate local regulations more effectively. Joint ventures are especially popular in sectors such as manufacturing, energy, and technology.
Direct Investment and Subsidiaries
For long-term market presence, establishing wholly owned subsidiaries can secure full operational control and allow firms to capture higher value from the market. However, this strategy requires careful risk assessment due to political, legal, and economic volatility.
Digital Market Penetration
Digital platforms and e-commerce solutions offer cost-effective access to new customer bases, particularly in regions with high mobile and internet penetration. This strategy can complement traditional physical investments.
