Foreign Direct Investment in Emerging Markets

Foreign direct investment (FDI) will enjoy sustainable success when it meets a large growth profitable emerging market, growth based SMEs, an open door foreign government and an adept local facilitation & mobilization team.

First, let's find out what it means to be prepared for FDI by reviewing the definition of foreign direct investment, to help put things in perspective. To summarize, it is an investment made by a company or entity based in one country, into a company or entity based in another country.

Many emerging market countries in sub-Saharan Africa (SSA) are so opportunity imbued with profitable advantage one cannot help but review how they attract foreign direct investment from strategy imbued investment countries such as China and others. FDI in SSA has grown from $9B in 2000 to $62B in 2008 and is projected by Earnest & Young Capital to hit $150B by 2015. China is now the biggest FDI contributor in Africa surpassing Great Britain, France and the US. One must take a peak into the trends and who the largest contributors are to total foreign direct investment. The latter for example saw flows from China into Africa in 2009 to be $129B and is projected by Bloomberg to hit $300B by 2015. China has certainly gotten its financial education, done its analysis and has quickly recognized the growth and large profit potential of African countries and is able to utilize its high work ethics coupled with low labor costs in Africa and China to place investment funds into businesses in those emerging markets for large profits.

The million dollar question is what attracts FDI today and where are those places and markets? Various studies have shown that FDI tends to flow into countries with the following:

1. Emerging markets where the FDI market is large and sustainable

2. Open and receptive government to foreign investment, where tax holidays, free trade zones and close to equal opportunities for foreign businesses exists for the local owned businesses

 3. Either reasonable infrastructure in the country or  the foreign company will still be very profitable providing its own infrastructure and security

4. Reasonable expectation of political stability

5. Active government privatization efforts

6. An Adept team and local agent that will facilitate efforts in the FDI country (contact our adept team today).

With the large thrust of Total FDI into Sub-Saharan Africa discussed above largely utilizing Vertical FDI, this is the region of promise. The two largest countries within the SSA are South Africa and Nigeria with the latter having the largest African population (8th largest in the world) of over 160 million and the 10th largest producer of oil in the world. Nigeria has also been rated as follows:

  • 4th largest equity market in the MSCI Frontier Market index– Largest outside of the Gulf Cooperation Council (GCC)
  • 5th fastest growing economy in 2010 covered by Citi Investment Research and Analysis (CIRA) economists – China, Taiwan, Singapore & Qatar
  • 1st among the N-11 leading ‘global growth generators’ (3G) over the next 40 years
  • Nigeria is the leading emerging market in the SSA.

  • The top markets available for vertical FDI in Nigeria include:
  1. The Real Estate sector with over 17 million housing shortage
  2. Infrastructure
  3. Agriculture and Agro Allied
  4. Mineral Mining,
  5. Manufacturing and
  6. Oil and Gas.

Additional details on how to invest in real estate in SSA's most populous country, Nigeria, and our Investment tips will provide a road map to FDI into Nigerian markets. Providing SME finance as debt or equity contributions can be as profitable and secure as you can get even juxtaposed with the real estate market. It's simply like supply meeting an insatiable amount of demand in pursuit of it

For further information on FDI entry into boomeranging US and Sub Sahara Africa emerging markets, investment analysis or investment education of them, please contact our adept team today.

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