World Bank Sees Foreign Direct Investment Streaming Into Africa in 2012

Africa is currently in an infrastructure boom

Capital flows into Africa is projected to grow significantly in 2012 as investors seeking higher returns are streaming out of Europe, and looking to the continent for better opportunities in infrastructure projects, a World Bank’s senior official said on Friday.

The Washington-based development lender expects economic growth on the continent to be 5.3 percent this year and 5.6 for 2013, despite increased concerns about the euro zone debt crisis, its main export market.

Marcelo Giugale, Africa’s Poverty Reduction and Economic Management director at the bank, said that the appreciation of the region’s currencies against the dollar was an indication of increased foreign direct investment (FDI).

“Most currencies in Africa have appreciated this year, which means investors expect some of those countries to do very well,” Giugale said in a recent interview.

“There is a boom in urban construction mainly from repatriated money. The amount of offer that Africa is getting to build its infrastructure, which are long haul investments, is clearly increasing.”

For instance, the government in Tanzania said it plans to build a $684 million 300 MW gas-fired power plant in the south of the country in the 2011/12 financial year, which runs until June 30, 2012, to plug energy shortages, after securing a loan from China.

Tanzania says the project would also involve construction of a 1,100-kilometre power transmission line from Mtwara in southern Tanzania to Singida region in the centre of the country.

In neighbouring Uganda, British oil company Tullow Oil Plc has a $10 billion plan to start pumping oil from huge reserves discovered on the shores of Lake Albert. Early production is scheduled to start in 2013 before ramping up to a major production phase in 2016.