Africa hit the hardest by global investment slump

Africa recorded the steepest drop in foreign direct investment (FDI) during the first half of this year as economic headwinds and investor uncertainty disrupted global capital flows across multiple sectors.

FDI inflows to the continent fell by 42 percent to $28 billion in the six months to June, down from $48 billion during a similar period in 2024, the sharpest regional decline amid a modest three percent global slowdown.

According to the United Nations Conference on Trade and Development (UNCTAD), the global dip reflects a widespread “wait-and-see” attitude among investors unsettled by escalating trade wars and geopolitical tensions.“Tariff escalation and ongoing geopolitical tensions have heightened investor uncertainty, leading to a widespread wait-and-see attitude across many…

Investment in greenfield projects – those developed from scratch – fell even more sharply, plunging 58 percent, while financing for ongoing projects by international investors rose by a modest one percent.

Globally, the closest decline to Africa’s was recorded in Europe, where inflows dropped 25 percent to $82 billion, while other regions, notably developed economies, saw modest growth driven by cross-border mergers and acquisitions.

North America posted a five percent rise to $176 billion, Asia’s FDI grew seven percent to $322 billion, and Latin America and the Caribbean recorded the fastest growth, up 12 percent to $93 billion.

A glaring trend not just across Africa but across developing countries globally, according to the UNCTAD data, was the sluggish performance in sectors that have traditionally been the most attractive to foreign investors.

Across the developing world, the manufacturing and energy and gas supply sectors saw a disruptive decline in investments by 36 percent and 32 percent respectively, after a two-year growth streak in both industries.

Contrastingly, the manufacturing industry in developed countries rose by 34 percent, as service sectors like ICT and electronics, especially semiconductors, saw a marked rise in investments amid the escalating trade wars.

The UN agency warns that investments in the sectors crucial to the realisation of the Sustainable Development Goals (SDGs) has taken an alarming downturn, derailing efforts to attain those goals, especially in developing countries.“The global investment climate remains challenging for sectors critical to achieving the SDGs as the number of SDG-related investment projects in developing countries fell by 10 percent,” said the agency.“Investment in renewable energy and infrastructure continued to decline, while investment in the health and agriculture sectors increased – though both remain at relatively low levels.”

According to UNCTAD, “the continued slump in international finance during the first half of 2025 was mainly driven by the high cost of capital, as interest rates are expected to remain higher for longer.”“Economic and geopolitical uncertainties have increased risk, while structural shifts across sectors continue to create financing gaps.”For Africa, the global uncertainties and economic headwinds didn’t just spook prospective investors, but also existing ones, sparking record exits especially in companies that benefitted from foreign capital injection.

According to the Africa Venture Capital Association, exits by international investors from African companies rose by seven percent to 27 in the six months to June, compared to a similar period last year.

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