What does the West invest in Africa?

An abundance of natural resources, a young population eager to work, and cross-border economic reforms have positioned Africa as a global player in trade and commerce in the 21st century.

Over the past decade, Western countries have even had their influence on the continent  challenged by China and Russia. Nevertheless, dollars and euros continue to flow into sectors like agriculture, energy and rare earth minerals, which are witnessing major growth.

"The interest in Africa has peaked over the past ten years. And what is particularly interesting about this new peak is that you see new players coming in," political economist Menzi Ndlovu told DW, highlighting that Western influence on Africa is not only being challenged by Beijing and Moscow.

Ndlovu's focus as an analyst is firmly on Africa. However, this means that he increasingly has to widen his gaze to assess trends from further afield.

"You see countries like India exerting themselves, you see countries like Saudi Arabia exerting themselves, you see countries like China, which is arguably the biggest external player in Africa," he explained from his office in Cape Town.

Growing appetite for opportunities

But despite this competition for control of foreign investment opportunities on the continent, the West and emerging players alike are also having to redefine their relationships with African nations in the 21st century, holding them off from engaging in an all-out trade war.

"There is more interest [in Africa], if you look at the US government. This particular government has made efforts in setting different departments that almost say that they are taking the extra step to foster partnerships rather than giving Africa aid," says Adjoa Adjei-Twum, the founder and CEO of EBII group, a specialist compliance and risk management consultancy firm.

While foreign direct investments in Africa have encountered fluctuations over the past decade, the overall trend points to growing interest and potential among various stakeholders, who all seem to have a hunger for Africa.

According to UN figures, foreign direct investment in Africa reached a record $83 billion (€77 billion) in 2021.

That's more than double the amount reported in 2020. 

Growing investment in energy

From oil to infrastructure to agriculture, there's been growing interest in Africa, especially in light of major global events.

Since Russia's invasion of Ukraine, Western countries are also courting Africa's energy sector in a bid to wean themselves off their dependence on Russian energy.

"Basically, it's got to do with the world's energy needs — the ability to try and source green energy. And at the moment, there is a green hydrogen project [in Namibia], which is partly funded by the European Union but backed by Germany," Cai Nebe, a DW journalist who covers Africa, explained, highlighting that this project is the biggest of its kind in Africa.

He added, however, that there is also a shift in Western investment to oil and gas opportunities on the continent, which he only expects to grow.

When it comes to meeting energy needs, Western-championed green policies appear to only extend so far into the continent.

A touch of colonialism

In its most recent report on Western and Chinese investments in Africa, the Centre for International Private Enterprise said that "(s)ome Western investments in Africa have been associated with exploiting natural resources without adequate environmental safeguards."

Furthermore, the document also describes how "Western investments have sometimes perpetuated economic dependence on foreign entities."

This is hardly a "win-win" situation for all involved, as transactions between Africa and other governments continue to be marred by such recurring accusations of exploitation on various levels.

Adjei-Twum believes that this narrative has to change, and wants especially politicians to be in charge of that change: "It is the responsibility of everyone. The leaders of these nations have the responsibility to see that every investment that comes into the country trickles down to the ordinary people."

Hedging Africa against the rest of the world

With or without a more equitable share for Africa, there simply is no slowing-down of the push to invest in Africa, according to Adjei-Twum. "They [African countries] have the raw materials. The minerals are attractive," she told DW, adding that the risky nature of investing in Africa often leads to players in the West having the upper hand at the negotiation table.

"Almost every African country is high risk. That means that any company that is doing well (in Africa) is also impacted because they are seen as high risk," Adjei-Twum added, highlighting challenges like political stability and infrastructure development, which remain crucial for unlocking the full investment potential of the African continent.

"High risk means high returns, so when an investor lends money to an organization in Africa, even banks, they will lend it at an interest rate that they can't even get away with it."

Ndlovu agrees, highlighting that the West hedges its risks in Africa by diversifying its investments elsewhere in the world. "We are seeing Western investments going to places like Asia, places like the Middle-East, and a lot of investment stays in the West itself," he explained.

Adjei-Twum believes that governments in Africa need to change their approach when dealing with the West if they want to be on an equal footing: "The governments have to have the right policies in place," she told DW, warning against policies that make Africa look "desperate for help."

"At the moment they [African countries] beg investors to come in."

Edited by: Sertan Sanderson