JOHANNESBURG – The surge in investment in Morocco’s budding automotive sector has seen the country close in on South Africa as the biggest recipient of foreign direct investment (FDI) on the continent.

A survey by professional services firm EY showed that the consistent growth in Morocco’s FDI saw it become the single biggest FDI destination in Africa last year, sharing the top rank with South Africa.

FDI projects in South Africa plunged 31percent last year to reach its lowest level in a decade.

South Africa had 96 FDI projects last year, down from 139 projects in 2016, while Morocco increased its FDI projects in 2017 to 96 from 81 in the previous year.

Analysts from EY said Africa’s automotive sector attracted 42percent higher investment last year with 47 projects.

“Morocco became the biggest beneficiary on account of its thriving car manufacturing facilities, favourable policies, high domestic demand and an attractive export location,” EY said.

“The country benefits from its historical ties with France, with French companies being the major investors into Morocco.”

Morocco’s thriving automotive industry was expected to see the country become the largest car manufacturer in Africa by 2020.

Last December, the Moroccan government announced that it had signed deals for 26 auto industry projects worth $1.45billion, including six with French automaker Renault.

Chinese company BYD Auto has also signed a Memorandum of Understanding to construct an electric car plant in the country.

The plunge in South Africa’s FDI saw southern Africa also lose its place as the leading FDI region last year, with inward investments dipping 21percent.

President Cyril Ramaphosa earlier this year launched an audacious investment target of $100billion over the next five years.

The government in October said the Presidential Investment Summit had netted nearly R290bn in pledges.

South African Chamber of Commerce and Industry economist Richard Downing said: “The world economy is moving ahead in tandem with the Fourth Industrial Revolution, South Africa will have to balance its politics and the cost of becoming and remaining an investment destination.”

Nigeria, Africa’s biggest economy, attracted few FDI projects in the period.

The West African country had 64 FDI projects, making it the fourth biggest recipient of investment in the period, behind Kenya whose inward investment surged 68percent.

John Ashbourne, a senior emerging markets economist at Capital Economics, said MTN’s dispute with Nigeria drew attention to that country’s unpredictable and opaque business environment.

“Other foreign firms have had less success navigating Nigeria’s often difficult business environment. UBS and HSBC both decided to quit the country earlier this year,” Ashbourne said.

EY’s report said governments needed to become more focused on policy reform and drive an agenda that stimulates and supports private sector economic activity. The US remained Africa’s largest investor, reporting an expansion in FDI projects after two consecutive years of decline.

US companies launched 130 projects last year against 91 in 2016.

The UK committed to 72 projects last year, significantly rising from the 41 projects in 2016, becoming Africa’s second-largest investor.

UK Prime Minister Theresa May in August said the country wanted to dislodge the US as the biggest investor on the continent and would invest £8bn in Africa in the next four years.

China was the fourth biggest investor on the continent last year, behind France, with Germany rounding off the top five.

BUSINESS REPORT