Africa’s telecommunications and technology industries have attracted the second highest number of Foreign Direct Investment (FDI) projects in 2020, after business services. Nigeria and South Africa lead in attracting FDI.
This is according to the Africa Attractiveness Report 2021 released by EY which emphasised that the modernisation of telecommunications networks by regional operators has helped to attract FDI.
The report states: “The telecoms sector received capital investment totalling around US$8.5-billion, with the largest investments focused on Nigeria and South Africa. Telecoms FDI was driven by governments’ push to expand their ICT infrastructure and increase mobile penetration in smaller economies, setting up national fibre optic cable networks and creating national broadband policies.”
There has also been a flurry of investment activity in datacentre construction, securing cloud computing capability and 5G network infrastructure in countries like Kenya, Nigeria and South Africa, which is boosting FDI inflows.
According to analysts at EY, Africa’s young demographics and rising urbanisation “have led to a growing internet economy, which has the potential to contribute US$180-billion to Africa’s economy” by 2025. This is a period deemed pivotal for Africa’s recovery from the COVID-19 pandemic.
FDI projects for Africa in 2020 were however “concentrated in regional tech hubs” such as Cape Town, Lagos, Cairo and Nairobi. These are supported by strong venture capital ecosystems and the presence of large tech companies.
Global hyperscalers such as Facebook, Google and Microsoft have been expanding their presence in Africa. Microsoft’s development centres in Lagos and Nairobi aim to hire 500 local software engineers by 2023.
South African telecommunications operator, MTN has announced plans to invest US$1.5-billion over three years to increase broadband penetration in Nigeria. Apart from MTN’s investment in Nigeria, “China and France are also major players in Nigeria’s telecoms sector” as the West African country speeds up plans for 5G networks.
According to data from Big Deal Africa, Nigerian tech start-ups attracted as much as US$1.2-billion in venture capital in the nine months to September 2021, taking up a massive 44% of all inflows into the wider African tech start-up scene.
fDi Intelligence quoted Jan Lammersen, an economist at FocusEconomics, as saying: “The importance of the tech sector, which could help diversify the economy is emerging faster.”