Who holds the biggest foreign investment in Africa? Not China

Across the African continent and in global discourse, a familiar narrative endures: China’s presence on the continent is vast, growing and disproportionate, leading many to believe that China is Africa’s top foreign investor. However, this narrative is misleading and ultimately inaccurate.

The latest World Investment Report reveals a much more nuanced reality of foreign direct investment in Africa. Data on foreign direct investment (FDI) shows that when it comes to the stock of investment – actual foreign-owned assets – traditional economic partners of Africa, particularly Europe and the United States, maintain a larger investment presence compared to China (Figure 1). These longstanding relationships, particularly with Europe, are likely to strengthen further, given the relatively strong Euro and the deeply embedded historical economic ties between the European and African continents.

Behind the misconception: why China’s influence is perceived differently

Several factors contribute to the persistent misconception of China’s perceived investment dominance in African economies:

The first stems from the rapid growth of China’s financial presence. In the early 2000s, Chinese companies had barely any investment in Africa. Even in 2010, China’s FDI stock in Africa, at US$13 billion, was smaller than Singapore’s (US$20 billion) or Malaysia’s (US$17 billion). However, by the 2020s, it surged to over US$40 billion, placing China among the top five sources of FDI in Africa. This rapid growth is evident in many African countries and across multiple sectors, from manufacturing and retail to services, and crucially, in strategic sectors such as commodities and resource extraction. These sectors typically attract significant media and public attention due to their broader economic and political implications and the complex forms of finance and debt they require over the long term.

A second reason behind China’s perceived dominance is the sheer visibility of its infrastructure projects, including railway networks, port facilities and large-scale energy installations. These projects often dominate the visual landscape of some African cities, garnering substantial media coverage. However, it is crucial to distinguish between investment and lending. Infrastructure projects are often financed through loans from Chinese lenders (such as policy banks) to African governments. This means African governments, not China, own these assets. The frequent, erroneous reference to ‘Chinese infrastructure investment in Africa’ conflates loans with actual investment, muddying the public’s understanding.

A caveat: it is important to acknowledge that official FDI data do not capture the full picture. FDI stocks primarily include investment from large Chinese corporations, excluding direct investment by private businesspeople – Chinese or otherwise – who invest in a country without official linkages to companies back home. While generally smaller in scale than FDI, these investments are often significant for African economies and are not exclusive to Chinese nationals. Unfortunately, there are no comprehensive data on this ‘translocal’ investment – defined as businesses set up by and run by foreign nationals but registered only in the host African country, with no registration in the investor’s home country – is lacking.

Contrary to the prevailing narrative, China is not currently the largest foreign direct investor in Africa. While China’s contributions are undeniably significant and highly visible with broader economic implications, Europe, the US and the UK – the transatlantic bloc – continue to hold the largest cumulative investment footprint on the continent. Even at the individual level, European countries and the US continue to have more FDI stocks than China. However, as the research literature has shown, investment flows from China (and other foreign economies) offer multiple benefits to the recipient nations. FDI, in particular, should be encouraged to promote long-term economic growth and diversification, even as its geographical composition shifts over time from Africa’s traditional partners.