Oil-rich African nations experience a significant decline in investment: World Bank report reveals a persistent downswing following plummeting oil prices.
Metal resource abundance leads to severe investment decline in Sub-Saharan Africa, while non-resource-rich countries maintain slower growth.
Fragile economies in Africa struggle with below-average investment growth across government, private, and foreign sectors, according to World Bank analysis.
According to the World Bank, Africa’s oil-rich nations show the greatest reduction in investment. This was indicated by the multilateral lender in the Africa Pulse report from April 2023. Depending on the degree of resource availability and fragility, different groupings of Sub-Saharan African nations have seen a slowdown in investment growth, the paper claims.
“Oil-abundant countries exhibit the largest and most persistent downswing in investment relative to the other groups. After exhibiting annual average growth of nearly 8% from 2010 to 2013, oil-abundant countries on average have experienced a contraction in investment since the 2014 to 2015 plunge in international oil prices,” an extract from the report notes.
The World Bank research also mentioned that sub-Saharan African nations with many metal resources are experiencing a severe decline in investment. In contrast, non-resource-rich nations saw the slowest slowdown in investment growth.
They fell in their yearly average rate from 6.3% in 2010 and 2013 to 2.2% in 2020 and 2021 (which is still far below their long-term average growth of 6.1%).
The World Bank research states that following the collapse in commodity prices, investment growth remained below the long-term average in fragile nations. According to the research, governmental, private, and foreign investments all show a steep decline in investment growth in the SSA area.
In the majority of the years under consideration, the increase in investment is below the long-term average (2000 – 2019), independent of the kind of agent undertaking it, be it public, private, or international. According to the analysis, there was a comparatively higher fall in private investment growth (from 5.9% in 2014 and 2015 to 3.1% in 2020 and 2021).
The increase of public investments decreased from 3.3% in 2014 and 2015 to 1.6% in 2020 and 2021). Meanwhile, since the start of the collapse in commodity prices in 2014 and 2015, foreign direct investment (FDI) has generally decreased. After the start of the Coronavirus (Covid-19) pandemic in 2020 and 2021, it went from having annual average growth of 1.9% in 2014 and 2015 to a contraction of 3.7% in 2016 and 2019, and then an even bigger downturn at 5.1% per year.
Insufficient investments in emerging or established exploration and production oil fields, as well as dropping and unstable international pricing of extractives, are to blame for the decline in foreign direct investments (FDIs) that has occurred since 2016, according to the World Bank research previously mentioned.