Why invest in the Horn of Africa?
In general, while transition states are challenging markets in which to do business, they hold untapped potential for the discerning investor. Investors can capitalize on these opportunities through three main pathways:
- Market-seeking: selling to the local market
- Efficiency-seeking: becoming more efficient in international production
- Resource-seeking: obtaining resources or assets from that country
After analysis of the various regions of transition states in Africa, it was found that the Horn of Africa is the most attractive region for market-seeking and efficiency-seeking investors, based on the number of opportunities that it presents. In addition to this competitive advantage, South Korea has a history of trade and investment in the Horn, as opposed to other regions in Africa, which will facilitate market entry and advancement.
Overview of the Horn of Africa
(Including Ethiopia, as an entry point)
- Economic growth is high across the region – between 5 and 9% – apart from Somalia (2% growth) and South Sudan which is declining.
- Total GDP of USD 188B, with 89% coming from Sudan (USD 95B) and Ethiopia (USD 72B).
- GDP per capita is highest in Sudan (USD 2,899). In Eritrea, Somalia, South Sudan and Ethiopia it is less than USD 800.
- Received USD 4.8B in FDI in 2016.
- Total FDI in the broad region is largely driven by Ethiopia which has been growing its FDI flows by 12% p.a.
- South Korean FDI to the region has increased five times since 2014 and is almost exclusively in Ethiopia.